Shares surged past $70 in early trade, giving the firm a market value of more than $9bn. They ended the day at about $58, still up more than 16%.

The long-awaited moment will inject more than $200m into Trump Media & Technology Group and hands the former president a stake worth more than $4bn.

Analysts say that is far more than the firm’s performance warrants.

Trump Media’s Truth Social, a Twitter-like service, brought in just $3.3m in revenue in the first nine months of last year and lost nearly $50m.

It says 8.9 million accounts have been created since the platform launched to the general public in 2022 as an alternative to mainstream sites such as Facebook, but it is not clear how many are active.

By comparison, the recently-listed Reddit currently has a market value of about $11bn. It boasts more than 70 million users and brought in $800m in revenue last year.

Kristi Marvin, chief executive of SPACInsider, compared Trump Media – which trades under the ticker DJT for Mr Trump’s initials – to a meme stock, in which prices are untethered from the business prospects.

Interest in Trump Media has also been fuelled by individual investors, as opposed to Wall Street firms, many of them apparently Trump supporters.

“Everybody expected to trade a little bit crazy today, which it has,” she said. “The real question is how does it trade a week from now, two weeks from now and nobody really knows.”

The deal to list Trump Media was first announced in 2021.

The move was accomplished via what is known as a SPAC, a merger with a publicly listed shell company, Digital World Acquisition Corp, which was expressly created to buy a company and take it public.

The deal was delayed by government investigations and other hurdles, but regulators cleared it earlier this year and Digital World shareholders voted in favour last week.

Ahead of the listing on the Nasdaq exchange, Trump Media officials called it a “pivotal moment” for the firm – and the wider media landscape.

“As a public company, we will passionately pursue our vision to build a movement to reclaim the Internet from Big Tech censors,” said Trump Media chief executive Devin Nunes, a former congressman.

“We will continue to fulfil our commitment to Americans to serve as a safe harbour for free expression and to stand up to the ever-growing army of speech suppressors.”

The debut comes at a critical moment for Mr Trump, who has been scrambling for cash to pay legal penalties and owns more than half of the firm’s shares.

He is currently barred from selling his holdings for about six months, making it difficult for him to tap the windfall immediately.

The company’s board, which is stocked with allies including one of his sons, could potentially change that rule, but analysts have said they think that would be unlikely to happen immediately.

If Mr Trump were to sell a significant chunk of his shares, it could hurt the share price.

Investors face other risks as well, tied to Mr Trump’s political fortunes and his 2024 presidential campaign.

A loss might be expected to hurt the share price, but a win could have the opposite effect, especially if it generated further demand from buyers hoping to curry favour with Mr Trump, said Michael Ohlrogge, a law professor at New York University.

However, Prof Ohlrogge said the current share price is “far, far elevated above what anyone would consider its fundamental value”.

Source: BBC

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As recently as the early 1980s, central bankers around the world could be heard moaning and groaning about having to hold physical gold reserves to back up their currencies. The trouble, expense and potential loss of picturesque cast metal in a world of infinite fiat money and digital bytes reflecting off satellites. It’s a trend: citizens would be amazed to learn that only around 8% of the money working as the lifeblood of economies around the world is in the form of coins and banknotes. Folding money is considered old-fashioned.

A banker might roll his eyes and joke to a colleague: “Imagine, we are continuing to pay out good money to pile up these shiny precious metal ingots in a vault, with armed guards. What is this, the Roman Empire?”

You do not hear that in the new Millennium. Disparagement of gold bullion has quieted, in an age of terrifying global debt overhang and failing trust in eqforeign counterparts and fiat currencies. As the world’s economies glide past an estimated one quadrillion dollars in debt instruments, and inflation eats away at everyone’s assets (but not those of the gold bugs and their holdings, notably, as gold, as recently as the 1970s going for US$ 32/oz., zips past US$ 2,000) the usefulness and credibility of the so-called “petrodollar” look increasingly unappetizing.

This would have been unthinkable had it not been for the foundation of the BRICS Group of nations. Its most unlikely beginning was with avaricious Goldman Sachs – of all people – who proposed a grouping of China, India and Russia, in mutual economic interest, pointedly excluding the USA, the “center of everything” since the end of World War II in 1945.

Hu Jintao, Manmohan Singh and Vladimir Putin got together on the sidelines of the 2008 Group of 8 (G8) meeting in St. Petersburg. Russia, now blackballed because of its “Special Military Operation” in Ukraine, was a G8 member, while India and China attended the gathering as part of a purported G8 “outreach” to emerging economies.

In 2009, the first summit of “BRICs” countries (excluding South Africa) took place in Russia. In 2010, at a foreign ministers’ meeting, the initial four agreed to invite South Africa, a formidable economic power on the continent.

By 2011, now a five-country organization—with the “S” now standing for South Africa— formed up, mostly in aversion to the increasingly inconvenient burden of dealing in dollars. Joining together with a BRIC Currency could alleviate the heavy burden incurred by US dollar-denominated debt, in a zero-sum game, always favoring the wealthy western economies: interest rates soared, as the US Fed struggled against inflation.

About this time, certain countries quietly started selling their USD reserves and stowing away tons of shiny gold bars. Note that it was not simply the “mavericks” who did not care for the damage inflicted on their economies by the Fed: the Finance Minister of Norway, never thought of as “anti-American” nation, publicly belly-ached about having to sell his country’s precious hydrocarbon reserves in dollars.

The other alarming factor was the lethal weaponization of the dollar. With the ignominious ouster of the Shah of Iran and the subsequent hostage crisis, billions of dollars of Iranian assets were “frozen” in the USA. When the Federal Republic of Germany went to reclaim their gold bullion from the Bank of New York they were first brushed off and later found many bars had been melted down and recast.

Around the planet, Uncle Sam began to be perceived as an unreliable, if not unscrupulous relative, who would turn on you and pocket your valuables if you did not behave his way. Whatever happened to Khaddafi’s tons of gold, spirited off by NATO pirates?

The buzzword was “dedollarization”. Appealing though the notion might be to those whose billions are locked away by Washington, it is worthwhile to pause and consider how much time went by and effort was expended in setting up the Euro. The EU, certified in 1957 by the “Luxemburg Treaty”, took a full forty-two years of hard work, before Maastricht was hammered out, in 1999.

The most recent BRICS Summit, hosted by President Cyril Ramaphosa of South Africa in August of this year, received endorsement from outliers like Algeria, Argentina, Bahrain, Bangladesh, Egypt, Indonesia, Iran and Saudi Arabia.

Member countries might be active in their economics, trade, and finance relationships, including payment protocol, but it is an unbalanced interdependence, pitting a behemoth like the PRC against, say, Argentina. An advanced economy cannot create a common currency with a primitive one, as one is too dependent on the other: interdependence implies balance. Politics alone won’t do the job.

Bear in mind that with all the grunting and shoving toward de-dollarization, currency trading in USD still constitutes 88 per cent of the total. Global reserves sit at 60 per cent in USD, 20 per cent in Euros and only 2 per cent in Renminbi. National debts are mostly in USD. It was amusing to watch Argentina hurriedly swap their Renminbi, disbursed after a recent large purchase from the PRC, for billions of dollars.

ASEAN gave it a shot, looking to set up the “Asian Currency Unit” (ACU); that yielded nothing, except for a convenient swap facility, eventually known as “Local Currency Settlements” (LCS), still functioning as of this writing.

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London (07/11 – 70)

President Ranil Wickremesinghe, at the helm of the United National Party (UNP), has orchestrated a remarkable turnaround for Sri Lanka’s tumultuous economy, tackling persistent challenges with a steadfast determination that has garnered widespread support across the national and international communities.

Upon assuming office, Wickremesinghe confronted an array of pressing issues, including severe electricity shortage resulting in daily power cuts, soaring inflation, an all time low foreign reserve value and scarcities in essential commodities such as fuel and milk powder. Swift and strategic actions within his first six months in power yielded tangible results, with the electricity crisis resolved and power outages becoming a thing of the past. Notably, the restoration of a stable supply of fuel and commodities has revitalised the country’s markets, marking a significant shift from the uncertainties of pre-Ranil Sri Lanka.

Sri Lanka’s President Ranil Wickremesinghe tackled persistent challenges with a steadfast determination that has garnered widespread support across the national and international communities, including managing the IMF program.

Despite the persistent specter of inflation, the president’s administration has implemented measures to mitigate its impact, gradually stabilising the economy and fostering an environment conducive to growth. The successful repayment of a substantial USD 200 million loan from Bangladesh underlines the administration’s commitment to fiscal prudence, earning commendation both domestically and internationally.

Managing the International Monetary Fund (IMF) program has presented its share of challenges, but President Wickremesinghe’s deft navigation of these complexities has underscored his administration’s dedication to responsible economic governance and effective policy implementation.

An assertive move that defined his tenure was the swift handling of disruptive protests that posed a threat to public order. Upholding the rule of law, President Wickremesinghe quelled dissenting voices with the assistance of law enforcement, demonstrating his resolve to ensure the seamless functioning of the government and the preservation of social stability.

The persistent opposition from the communist factions in Sri Lanka, notably including the Marxist-Leninist former armed insurrectionist Janatha Vimukthi Peramuna (JVP) political party and its affiliated front organisations such as the Frontline Socialist Party (FSP) and the Inter-University Student Federation (IUSF), commonly known as ‘Anthare,’ continues to pose a challenge to President Ranil Wickremesinghe’s administration. After failing to launch armed insurrections against the state in the 70s and 80s, these groups have been known to mobilise protests, riots, and disruptive activities, often with the intention of undermining public peace and stability. Additionally, the communist-influenced trade unions across various sectors have resorted to strikes and sit-ins, leveraging their collective power to impose self-serving demands and disrupt the normal functioning of key industries. Notably, the Aragalaya movement, also influenced by communist elements, underscored the pervasive influence of such groups within the social and political fabric of the nation. President Wickremesinghe’s firm and resolute approach to tackling these disruptive forces has effectively marginalised their impact, marking a stark departure from the previous administration’s inability to address similar challenges. His unwavering stance against agitators and hooligans has relegated these disruptive elements to the fringes of the political landscape, highlighting his adeptness in managing volatile political dynamics and ensuring the preservation of public order and stability.

President Wickremesinghe’s political journey is marked by intrigue and challenges, with his lineage and astute leadership consolidating his position within the UNP. The rift with Sajith Premadasa, the current opposition leader, exemplifies the complexities of Sri Lankan politics. Despite internal divisions and external pressures, President Wickremesinghe’s ability to secure the presidency with a solitary parliamentary seat underscores his political acumen and resilience in the face of adversity, leaving an enduring imprint on the nation’s political landscape.

As President Ranil Wickremesinghe continues to navigate the intricacies of governance and policymaking, his commitment to fostering economic stability and upholding social order serves as a testament to his leadership and vision for a prosperous Sri Lanka. With a resolute stance against disruptive elements, President Wickremesinghe has solidified his position as a bulwark against political turbulence, ensuring that the nation marches forward on a trajectory of progress and prosperity.

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Vale Canada and Sumitomo (5713.T) signed the so-called heads of agreement to sell the shares to PT Mineral Industri Indonesia (MIND ID), the country’s state mining holding company, Vale Base Metals said in a statement.

Share divestment is a condition required by Indonesia to extend Vale Indonesia’s mining permit, which will otherwise end in 2025. Foreign investors are required to divest 51% of their stakes to local buyers after a certain period of operation.

The sales and purchase agreement is expected to conclude at the end of January, the deputy minister for state-owned enterprises, Kartika Wirjoatmodjo, told Reuters on Saturday.

“MIND ID is currently conducting a due diligence and will soon submit its price offer,” he said.

Upon completion, MIND ID will become the largest shareholder of Vale Indonesia with its stake rising to 34% from 20%. Vale Canada will hold 33.9%, down from 43.79%, and Sumitomo 11.5%, down from 15.03%, according to the statement.

Around 20% of Vale Indonesia’s shares are publicly traded.

A “balanced” management structure will be set up to maintain operational stability at the Indonesian unit, the statement said.

“We look forward to working within the new shareholding structure with our partners to support the country’s downstreaming ambitions and deliver strong economic value to our stakeholders and communities over the long run,” said Deshnee Naidoo, chief executive of Vale Base Metals.

Indonesian President Joko Widodo, who watched the signing, said the country welcomed the agreement and appreciated Vale’s commitment to partner with Indonesia.

“The divestment will make MIND ID as the biggest shareholder of Vale (Indonesia), so MIND ID and Vale Canada can exercise a joint control over Vale (Indonesia),” he said in a statement on Friday.

Widodo expressed hope that Vale would increase its support for Indonesia’s efforts to shift to cleaner energy.

Indonesia is keen to develop batteries and electric vehicles to take advantage of its rich nickel reserves.

Vale Base Metals is committing around $10 billion of investment in Indonesia over the next decade.

Source: Reuters

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Brussels (08/11 – 50)

On March 20, the IMF approved a $3 billion Extended Fund Facility (EFF) to support Sri Lanka amid its economic crisis. The approval is expected to pave the way for other financial institutions to extend support to the bankrupt South Asian country. IMF program was made possible largely due to the untiring efforts of the President Ranil Wickremesinghe.

The IMF links financial assistance to a country to policy reform, a conditionality that usually imposes political as well as economic changes in the recipient nation. The logic behind IMF conditionality is multifold. It is supposed to prevent moral hazard by governments that receive loans. These conditions allow the IMF to monitor the behavior of the recipient states and allegedly promote best practices and good governance.

Sri Lanka has been to the IMF 16 times before; five of these since 2000. The full amount of the IMF loan was not disbursed on six occasions because Sri Lanka did not fully comply with the conditions of the loans. This included the previous EFF in 2016, when the conditions imposed by the IMF built additional pressure on the domestic economy. There has been much skepticism about Sri Lanka adhering to the more stringent IMF conditions this time around.

Despite the skepticism that prevails among journalists and economists, the IMF is very happy about the progress Sri Lanka is making on the commitments it made as a part of the IMF’s four-year EFF to the country.

An IMF delegation, which was in Colombo recently to assess the progress of the agreement, is optimistic. IMF Director of Asia and Pacific Department Krishna Srinivasan told a press conference in Colombo on May 15 that the Sri Lankan government has shown “commitment to the reform effort” that is a part of the agreement with the IMF.  He added that the “authorities are making good faith efforts to negotiate with all the creditors, both private creditors and official creditors.”

Ranil Wickremesinghe took over as President of Sri Lanka in July 2022 when the country was in the middle of its worst economic and political crisis since independence in 1948. On March 20, 2023, the IMF approved a $3 billion Extended Fund Facility (EFF) to support Sri Lanka amid its economic crisis.

Peter Breuer, IMF’s Senior Mission Chief for Sri Lanka, Asia, and Pacific Department said they “see things developing more or less in line with expectations.”

Srinivasan added that Sri Lanka had to complete a number of prior actions before the IMF approved its bailout package. These actions were extensive and required a significant commitment from the Sri Lankan government.

Among these are cost-reflective of a number of goods and services that the government had subsidized for decades.  Sarwat Jahan, the IMF Resident Representative in Sri Lanka said the Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB) would have to recover their costs until the end of the IMF program.

The government met all these requirements, which shows that they are serious about implementing the reforms necessary to address the country’s economic crisis, Srinivasan said.

The conditions attached to IMF loans often involve actions aimed at discontinuing industry subsidies, avoiding exchange rate manipulation, adjusting budget priorities, and regulating wage levels. Leaders, who face diverse political limitations, differ in their willingness to engage in an agreement with the IMF and make compromises in these four areas.

Considering that IMF loan conditionality agreements usually involve implementing fiscal austerity measures, leaders with larger winning coalitions will encounter more challenges when attempting to negotiate an agreement for IMF financing.

On the other hand, when a regime maintains power through a narrower network of closely-connected supporters, he or she finds it easier to enter into an agreement with the IMF.

Miles Kahler, a senior fellow for global governance at the Council on Foreign Relations in Washington, DC, in his 1993 book chapter titled “Bargaining with the IMF: Two-Level Strategies and Developing Countries,” outlines two key aspects of domestic politics that influence the process of loan negotiations: firstly, the degree to which a technocratic elite is insulated from economic interests, and secondly, the frequency with which elites face political challenges like elections.

Another factor that can impede the formation of a loan agreement is the presence of multiple veto actors, such as a separation of powers or the existence of multiparty governing coalitions.

Kahler says that when a country has a higher number of veto actors capable of obstructing a loan agreement, the scope of domestic political consensus becomes narrower, resulting in increased negotiation costs for the IMF. Typically, the count of veto actors is determined by assessing the number of parties in a government coalition in countries where genuine political competition exists.

This explains why it was extremely difficult for former President Gotabaya Rajapaksa, who came into power through a coalition of populism and with the support of a number of interest groups, from big businesses to professional associations, to enter into negotiations with the IMF.

On the other hand, Wickremesinghe is the head of the United National Party, a political party that obtained around 250,000 votes from 15 million eligible voters. He has one MP in Parliament, Wajira Abeywardana, who is a staunch loyalist. Wickremesinghe is backed in parliament by the Sri Lanka Podujana Peramuna (SLPP), whose MPs depend on him for political survival and would vote for any legislation that he brings forth.

Sri Lankan legislators are entitled to several perks at the end of the full tenure of five years and most of the SLPP MPs that back Wickremesinghe are adamant on completing their terms. Wickremesinghe has also indicated that there will be no elections until the economy is stabilized and it is likely that the first election Sri Lankans will see is a presidential election, probably in 2024.

Therefore, Wickremesinghe can implement the IMF recommendations completely, as he is not answerable to any political coalition or interest groups. Neither does he face an election. Wickremesinghe’s personal ideology also aligns with that of the IMF. It is unlikely that these factors were ignored by the IMF when the loan was approved and when they evaluate whether Sri Lanka will adhere to IMF conditionalities.

Source

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London (05/11 – 44.44)

Benjamin Wey, a Chinese-American financier, founder of Fintech Holdings and a history of legal trouble, is suing Sri Lanka for $250 million. Wey claims that he was assured by Sri Lanka’s central bank governor that the country would repay a $250 million bond. However, Sri Lanka defaulted on the bond in April 2022.

Wey is seeking to collect the full amount of the bond, plus interest. He has filed a lawsuit in the US District Court for the Southern District of New York.

The lawsuit is a major setback for Sri Lanka, which is already facing a severe economic crisis. The country is struggling to repay its debts, and the lawsuit could make it even more difficult to secure a bailout from the International Monetary Fund (IMF).

The US government has intervened in the lawsuit, and it is unclear how the case will be resolved. However, it is likely to drag on for several years, and it could further destabilize Sri Lanka’s economy.

Notorious financier, Benjamin Wey wants to collect from Sri Lanka, the full amount of the $250 million bond plus interest. He has filed a lawsuit in the US District Court for the Southern District of New York.

Wey is a controversial figure. He was arrested in 2015 on charges of fraud, but the charges were dropped. He was also sued for sexual harassment, and he settled the case for $5.65 million.

Wey is the founder of Fintech Holdings, a holding company that owns several businesses, including Hamilton Reserve Bank (HRB). HRB is the entity that is suing Sri Lanka.

Sri Lanka is facing a severe economic crisis. The country is struggling to repay its debts, and it has been forced to default on several bonds. The crisis has led to widespread shortages of food, fuel, and other essential goods.

The IMF has offered to bail out Sri Lanka, but the government has been slow to agree to the IMF’s terms. The lawsuit filed by Wey could further complicate the negotiations with the IMF.

It is unclear how the lawsuit will be resolved. However, it is likely to drag on for several years. The case is complex, and there are many legal issues that need to be resolved.

The lawsuit could also have a significant impact on Sri Lanka’s economy. If Wey is successful, it could force the country to default on even more debt.

This could further destabilize the economy and make it even more difficult for Sri Lanka to recover from the crisis.

The lawsuit is a major setback for Sri Lanka, but it is also a test of the country’s legal system. If Sri Lanka is able to defend itself against the lawsuit, it will send a message to other investors that the country is a safe place to do business.

The outcome of the lawsuit will also have implications for the IMF. If the IMF is seen as being unable to protect its borrowers from predatory lawsuits, it could discourage other countries from seeking bailouts from the IMF.

The lawsuit is a complex and far-reaching case. It will be interesting to see how it is resolved and what impact it has on Sri Lanka, the IMF, and the global economy.

Source : Lanka News Line

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Brussels (25/11 – 33.3)

Tajikistan Supreme Court has sentenced a widely respected 65-year-old female journalist, Ulfathonim Mamadshoeva, to 21 years in prison on charges of incitement to overthrowing the government. Mamadshoeva was accused by the authorities of being a leading figure behind the political turbulence that rocked her native Gorno-Badakhshan Autonomous Region (GBAO) earlier this year. State propaganda has previously alleged that the veteran reporter and activist hatched the purported plot, for which no credible evidence has been produced, at the behest of an unnamed foreign government. 

Mamadshoeva’s brother, Khursand, was last week sentenced to 18 years in prison on related charges. Her ex-husband, Kholbash Kholbashev, a former senior official in the border service, has been given a life sentence. All the trial proceedings were held behind closed doors. The only details to have filtered out have come from relatives of the defendants.

65-year-old female journalist, Ulfathonim Mamadshoeva was accused by the authorities of being a leading figure behind the political turbulence that rocked Gorno-Badakhshan Autonomous Region (GBAO) earlier this year. State propaganda has previously alleged that she had hatched the purported plot, for which no credible evidence has been produced.

Mamadshoeva is just one of a countless number of people from Tajikistan’s eastern Pamirs region to have face arbitrary arrest and summary trials over the last year over claims of involvement in pro-autonomy activism. Few of the accused have been given access to legal representation. The campaign of repression is the culmination of a violent government crackdown in the GBAO in May-June that was unleashed in response to protests.

By the account of the General Prosecutor’s Office, at least 29 people were killed during security sweeps. Prosecutors later filed criminal cases against 109 Pamiri leaders and their followers.  Also last week, the Supreme Court sentenced Faromuz Irgashev, a 32-year-old Pamiri lawyer who attempted without success to run in the 2020 presidential election, to 30 years in prison. 

When unrest first broke out in GBAO in February, Irgashev was accused of acting as an intermediary between protestors and the authorities, assisting in defusing the tensions. One result of negotiations was approval for the creation of a 44-person commission involving all sides of the unrest to investigate the root of the tensions.

By May, 10 members of that commission had charges filed against them on the grounds that they had allegedly formed a criminal consortium.

Source: Genocide Watch

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The report from the National Association of Realtors on Tuesday also showed that the median house price last month was the highest for any October. Barring a rebound in November and December, home resales this year are on track for their worst performance since 1992.

“The combination of high prices, high mortgage rates, and millions of homeowners unwilling to move, given they’ve locked in low rates, has frozen the market,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.

Existing home sales tumbled 4.1% last month to a seasonally adjusted annual rate of 3.79 million units, the lowest level since August 2010 when the sales were declining following the expiration of a government tax credit for homebuyers.

Home resales are counted at the closing of a contract. October’s sales likely reflected contracts signed in the prior two months, when the average rate on the popular 30-year fixed-rate mortgage jumped to levels last seen in late 2000.

Economists polled by Reuters had forecast home sales would slide to a rate of 3.90 million units. Sales fell in the Northeast, West and the densely populated South. They were unchanged in the Midwest, the most affordable region.

Home resales, which account for a big chunk of U.S. housing sales, plunged 14.6% on a year-on-year basis in October.

The rate on the popular 30-year fixed-rate mortgage averaged 7.31% in the final week of September, before peaking at 7.79% in late October, the highest level since November 2000, according to data from mortgage finance agency Freddie Mac.

Though it has since retreated following data this month showing the labor market cooling and inflation subsiding, the rate averaged a still-high 7.44% last week.

Minutes of the Federal Reserve’s Oct. 31-Nov. 1 meeting published on Tuesday showed that “a few participants observed that activity in the housing sector had flattened out in recent months, likely reflecting the effects of further increases in mortgage rates from already elevated levels.”

The housing market has borne the brunt of the U.S. central bank’s aggressive monetary policy tightening, with residential investment contracting for nine straight quarters, before rebounding in the third quarter, thanks to builders trying to take advantage of the housing shortage.

Stocks on Wall Street were trading lower. The dollar rose against a basket of currencies. U.S. Treasury prices were mixed.

TIGHT SUPPLY

There were 1.15 million previously owned homes on the market last month, down 5.7% from a year ago. Most homeowners have mortgage rates under 5%, making many reluctant to sell. Before the pandemic, there were nearly 2 million homes for sale.

Lawrence Yun, the NAR’s chief economist, told reporters that realtors will be speaking with their representatives in the U.S. Congress about a government tax incentive for homeowners who have been living in their homes for a long period to encourage them to put their houses on the market.

Yun also noted that even if mortgage rates continued to slide, in tandem with U.S. 10-year Treasury yields, affordability would remain a challenge in the absence of adequate supply. The lack of previously owned houses is boosting demand for new homes.

At October’s sales pace, it would take 3.6 months to exhaust the current inventory of existing homes, up from 3.3 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand. There is an acute shortage of houses in the $100,000-$250,000 price range.

Though builders have been breaking more ground on new housing projects, they are being constrained by the higher borrowing costs.

With supply still tight, multiple offers were the norm in some areas, keeping house prices on an upward trend on a year-over-year basis. The median existing house price rose 3.4% from a year earlier to $391,800, the highest for any October. About 28% of the homes sold last month were above the listing price.

Properties typically remained on the market for 23 days in October, up from 21 days a year ago. Sixty-six percent of homes sold in October were on the market for less than a month.

First-time buyers accounted for 28% of sales, as they did a year ago. This share is well below the 40% that economists and realtors say is needed for a robust housing market.

All-cash sales accounted for 29% of transactions compared to 26% a year ago. Distressed sales, including foreclosures, represented only 2% of transactions, virtually unchanged from the prior year.

“The odds of substantially improved sales in the near term remain very low,” said Daniel Vielhaber, an economist at Nationwide in Columbus, Ohio. “Looking into the first half of 2024, supply promises to remain a significant roadblock as mortgage rates are expected to remain high.”

Source: Reuters

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Producers entered 2023 thinking the 590,000 barrel per day (bpd) expansion – nearly tripling the existing pipeline’s capacity – from Alberta’s landlocked oilfields to the Pacific Coast would be filling with oil by year-end – the last step before full operations commence.

However, the project, about 95% completed, has been beset by construction issues in British Columbia, stoking concerns among traders and analysts that its start will be delayed beyond the current target of late March 2024. In October, TMX said linefill would start in the first quarter and take up to seven weeks.

On Tuesday Canadian regulators denied a variance request, a move Trans Mountain said risked delaying the project’s start date. That comes after changing some of its route and dealing with a work stoppage for environmental noncompliances.

It is just the latest hurdle for the Canadian government-owned project after being plagued by years of regulatory delay, environmental opposition and massive cost overruns.

While over the years the pipeline’s start date has been moved further back, supply has kept coming. Further delays could force producers to accept lower prices for their crude and to put more barrels into storage to deal with a glut of oil stranded in Alberta while they wait for the pipeline to start.

TMX’s construction hold-ups already helped push the discount, or differential, on benchmark Western Canada Select (WCS) heavy crude to the U.S. benchmark crude futures close to $30 a barrel last month, the deepest level in a year.

WCS was last at a $22 a barrel discount, roughly $7 wider than average, according to brokerage CalRock. Light synthetic crude from the oil sands, another key Canadian grade, is trading close to its deepest discount since 2020.

With Canada exporting around 3.8 million bpd via pipelines, each additional dollar the discount widens amounts to millions in lost revenues for oil companies, analysts say.

“There seems to be growing nervousness in the market that the start date will be later,” said RBN Energy analyst Martin King. “More people are getting concerned that this is going to go beyond into the second quarter, maybe even the third.”

The blowout in WCS differentials also highlights how the troubled expansion, likely one of the last big oil pipeline projects to be built in Canada, continues to inflict pain even as it nears the finish line.

TMX’s construction budget has already quadrupled to C$30.9 billion ($22.75 billion), on which Canada is expected to have to take a significant write-down.

“It’s not just the cost of construction which is outrageous, but the impact on the Canadian economy of the (WCS) differential and oil production not getting to market,” said Heather Exner-Pirot, special adviser to the Business Council of Canada.

OUTPUT CLIMBS, NO RAIL TO THE RESCUE

The concerns come as output in Canada, the world’s fourth-largest oil producer, climbs toward record levels, outpacing capacity on existing pipelines to the U.S.

Canada, produced 4.86 million bpd in 2022 and is forecast to hit 5.5 million bpd by 2030, according to Kevin Birn, chief analyst of Canadian oil markets at S&P Global.

Oil companies are expected to add a combined 375,000 bpd in 2023 and 2024 alone, and the coming winter months are typically peak production season in Canada.

Conventional oil and gas producers will drill 8% more wells in 2024 to take advantage of greater access to pipelines including Trans Mountain.

As production climbs, space is increasingly being rationed, or apportioned, for all shippers on the 3.1 million bpd Enbridge Inc (ENB.TO) Mainline system, which ships the bulk of Canada’s crude exports to the U.S.

Apportionment hit 35% and 28% on light and heavy oil pipelines respectively in December, Enbridge said, meaning more than a quarter of all barrels are being turned back. In August Mainline apportionment was zero.

In the past, Canadian companies have exported excess crude using railcars, despite the higher cost. Rail exports hit 145,000 bpd in September, nearly doubling from May, according to latest data from the Canada Energy Regulator.

Wider crude differentials indicate crude-by-rail levels increased to about 250,000-300,000 bpd in November, said James Davis, head of upstream oil at energy consultant FGE.

Crude-by-rail, however, is unlikely to bring big relief to Canadian producers.

Jesse Jones, head of North American upstream at Energy Aspects, said rail will not be able to ship all the barrels being pushed off pipelines by high apportionment.

Interviews with terminal operators and company filings also suggest the crude-by-rail industry has foundered in recent years and capacity will struggle to rise significantly.

Smaller players especially will be reluctant to sign commitments with TMX around the corner, Jones said

“We’re getting more enquiries, but we move substantially less than we moved a couple of years ago, everybody is moving less,” said John Zahary, CEO of Altex Energy, a terminal operator shipping around 10,000 bpd.

Shipments will be limited by a railcar shortage and uncertainty over the profitability of long-term crude-by-rail economics, said Kent MacDougall, chief commercial officer at Torq Transloading, which ships about 10,000 bpd.

“It’s challenging and it’s cumbersome to do rail for spot deals,” he said.

Source: Reuters

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Frankfurt (3/12 – 12)

The relatively rapid cohesion of disparate nations, historically competitive or even at war with one another, into the European Union came about in part because of the ongoing threat from the Soviet Union. The specter of a tank invasion from Warsaw Pact nations, today forgotten, was such a reality that the German government kept a major portion of its gold bullion across the Atlantic.

The USSR, an ally in World War II after being double-crossed by Hitler – remember the “Non-Aggression Pact signed in Moscow by von Ribbentrop and Molotov – was soon appraised as a danger in itself when, at the conclusion of hostilities, it ringed itself with unwilling “satellites”. After having suffered under brutal Nazi rule, Poland, Czechoslovakia and others found themselves subservient to Moscow, often occupied by Russian troops.

Thus in 1949 NATO, or the North Atlantic Treaty Organization, was established as an intergovernmental military alliance, encompassing 29 European countries and two North American ones. In fact it was an American creation and continues until today under US domination. Its primary purpose was stated as follows: “to safeguard the security of its members and promote peace and stability in Europe.”

A wry summary of the purpose of NATO is “…to keep the Americans in, the Germans down, and the Russians out”; this is often attributed to Lord Hastings Lionel Ismay, the first NATO Secretary General. The quote has since become a common way to describe the dynamics of NATO. The Federal Republic of Germany continues to host American military bases, nearly 40,000 American troops and nuclear weapons, just as it did during Post-WW II Occupation.

The common belief of military strategists is that a paranoid, expansionist USSR, under the tyranny of Joseph Stalin, would inevitably be at war with the democratic nations of the west. Some Soviet leaders and military may have assumed the same, although it never came to pass. The politicians talk tough, but those in charge of the weapons of mass destruction are justifiably terrified of them.

American nuclear weapons were stationed in Europe, pointed at the Soviets, in case of a sneak attack; the French, having decided to refrain from joining NATO, since President Charles de Gaulle considered it too much of an American-dominated organization, had their own, a “Force de Frappe”, part of a triad of air-, sea- and land-based nuclear weapons intended for “dissuasion”, the French term for “deterrence”.

With the exception of some strongly-anti-Communist military men, nuclear war was generally considered to be impractical, as even a small number of detonations could effectively paralyze any nation, and airtight defense against nuclear attack was simply impossible, once ICBMs proliferated. At the height of the Cuban Missile Crisis, General Curtis LeMay urged President Kennedy to launch an all-out attack on the Soviets; Kennedy mused, out loud, “Can I afford to lose twenty million voters?” that being a conservative estimate of the deaths that would result from a Russian retaliatory attack on the US mainland.

Following the totally unexpected collapse of the Soviet Union in 1991, notable as a colossal failure on the part of western intelligence organizations to anticipate, NATO was faced with finding a new raison d’etre to justify its enormous budget – mostly born by the Americans, whose military-industrial complex is the single greatest support for a deindustrialized economy, once manufacturing was offshored to the People’s Republic of China, Korea, Vietnam and other cheap-labor countries.

The much-abused Finland joined NATO in April 2023, in part because of the conflict in Ukraine. The clever Europeans, offering tempting goodies including economic benefits and modern weaponry, have managed to lure in former Soviet satellites Poland, the Czech Republic and Hungary (members since 1999), Estonia, Latvia, Lithuania, Slovakia, Slovenia and Bulgaria (all joining in 2004). It is clearly a valiant attempt at a historical “containment” of Russia – including the “oddball member” of Türkiye, a ferociously Islamist republic dedicated to the conquest of an infidel Europe, not to mention a diehard enemy of fellow NATO member Greece.

The clearly-stated American objective, in the words of a Pentagon document, is “total spectrum dominance”, with the USA as the single superpower on the face of the planet. Russia, possessing some 6000 nuclear weapons on land and at sea, is an inconvenient obstacle to the achievement of this goal; the unexpected rise of the People’s Republic of China as a military and naval force, financed by the profits from export sales across the globe, adds another challenge to American dominance. China never had a blue-water navy; it has a respectable one now, thanks in part to the Russians, as NATO has unexpectedly pushed the two legacy adversaries into a marriage of convenience.

The “Special Military Operation” of the Russian Federation in Russian-speaking eastern Ukraine, in response to reported repression and slaughter of Russian speakers in the Donbass from 2014, has been a godsend to both NATO and the western military-industrial complex, with a ready market for its tanks, helicopters, 155mm shells and other armaments. The trigger for the Russian invasion was the clearly-stated stance of Ukraine to become a member of NATO, which Russia considers an existential threat: no way will they countenance nuclear missiles three minutes’ flight from the Kremlin. While the Americans are cheering Ukraine on (while sending no soldiers to fight there), the Europeans, perhaps with a memory of what it was like to be bombed, are less enthusiastic about approving Ukrainian membership: Article 5 of the Mutual Defense Agreement states that an attack on any NATO member will require all the rest to pile in and retaliate. Europe does not fancy turning into a radioactive ashtray. The United States of America simply cannot imagine it, never having been bombed to bits.

“’Equipment that defends America and is made in America. Patriot missiles for air defense batteries, made in Arizona. Artillery shells manufactured in 12 states across the country, in Pennsylvania, Ohio, Texas. And so much more,’ the politician stated. ‘You know, just as in World War II, today patriotic American workers are building the arsenal of democracy and serving the cause of freedom.’

“Ukraine has been striking Russian logistics hubs using Lockheed Martin’s Guided Multiple Launch Rocket System, or GMLRS, that are partially made in Lufkin, Texas — a city of 34,000 people that saw its paper mill and foundry close over the last two decades.” [case study in deindustrialization.]

“It is represented by Republican Rep. Pete Sessions, a Ukraine aid supporter, who said Friday that the U.S. has an obligation to protect Ukraine under its post-Cold War security commitments.

“The U.S. has awarded hundreds of millions of dollars in contracts for the High Mobility Artillery Rocket System launchers that fire GMLRS and are made in Camden, Ark., a town of about 10,000 people that is 100 miles south of Little Rock.

“Republican Rep. Bruce Westerman, who represents Camden, said critics of government spending can be surprised to know some of that spending is going back to communities like his.”

In the opinion of many of these fine folks, killing Russians is a great idea, particularly when it is such a profitable one. That Russia will escalate with nuclear weapons, obliging NATO to do the same, is dismissed as ridiculous.

As ever, to understand the deep dynamics of the situation, simply “follow the money”.

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