- Road To World War 3 Unveiled: Is China Planning To Deploy Its Army Against North Korea?
Authored by Mac Slavo via SHTFplan.com,
New photos of a recent highway construction in China could be part of a contingency plan to invade North Korea or amass a huge army on their shared border.
Experts fear this newly uncovered plot could stoke the fires of World War 3, inevitably involving the United States.
According to The Express UK, communist China has traditionally been North Korea’s closest ally, but Kim Jong-un’s continued nuclear and ballistic missile tests have tested Beijing’s patience on the rising tensions worldwide. These new revelations also come as North Korea was spotted transporting 30 Scud missiles from Hwangju, south of the capital Pyongyang, to Nampo, on the Korea Bay coast opposite China.
New photos have emerged and they reveal that the Communist superpower is building a six-lane highway in its desolately populated northeast on route to North Korea.
With most Chinese peasants not able to afford the luxury of a car, the construction of the G1112 Ji’an–Shuangliao Expressway, has led experts to believe it will be used for quick deployment of tanks and troops to its North Korean border.
The photos obtained by Daily Star Online show Chinese construction workers digging tunnels through the mountains and massive cranes constructing bridges over rivers.
Chinese workers construct a six lane highway to North Korea’s border.
Scott Snyder, senior fellow for Korea studies and director of the program on US-Korea policy at the Council on Foreign Relations, told Daily Star Online:
“China’s Jilin province has even budgeted and paid for improvements in road infrastructure inside some parts of North Korea in recent years in order to improve logistical access to the Rason port inside North Korea.”
Dean Cheng, an Asia security expert at the Heritage Foundation, a think tank in Washington, said Beijing would have a ”vast array” of contingency plans involving military options to seize Kim Jong-un’s nuclear weapons. And just last week, a highly respected security think tank warned that the threat of war between China and the US was now real. In the bombshell report, the Rand Corporation said any conflict between North Korea and South Korea and the US would quickly spiral into World War 3.
If it’s decided upon by a nation to “take out” the North Korean dictator, Kim Jong-Un, American and Chinese troops would then rush across the border in a race to take control of the tyrant’s nuclear weapons and missile facilities colliding in a clash between China and the US, effectively spawning WW3. A whopping 85% of North Korea’s nuclear facilities are believed to be located within 62 miles of the Chinese border.
China actually threatened the US with a “real war” last month. The communist nation said that Donald Trump had made a “serious miscalculation” over North Korea. Photos uncovered by a North Korean monitoring site suggested China was secretly helping Kim’s nuclear missile program. But there were other confusing and conflicting signs that North Korea may be preparing to fire missiles towards China next week.
It looks like the world is steamrolling its way to a third world war.
- Iranian Parliament Speaker Says US "Will Regret" Withdrawing From Nuclear Deal
Iranian Parliament Speaker Ali Larijani said Monday that the US would face stiff consequences if it withdraws from the JCPA – informally known as the Iran deal.
Speaker of Iran's parliament Ali Larijani said that Iran "had a developed plan and a certain law,” should the United States withdraw from the agreement on Tehran's nuclear program, adding that Washington would "regret it,” Sputnik reported.
Larijani made the statement in St. Petersburg where he was taking part in a parliamentary forum.
President Donald Trump elicited cries of protest from the US’s co-signers of the pact, after saying last week that his administration had decided not to certify Iran's compliance with the deal and would instead leave the final decision up to Congress. The Trump administration has repeatedly insisted that, while Iran is technically complying with the terms of the pact, it is more broadly violating the “spirit” of the agreement by allegedly continuing to fund terrorist groups and developing and testing ballistic missiles.
Trump’s speech, in which he also accused Iran of being a threat to global security, elicited howls of disapproval from the US’s partners in negotiating the deal.
"We encourage the US Administration and Congress to consider the implications to the security of the US and its allies before taking any steps that might undermine the JCPOA, such as re-imposing sanctions on Iran lifted under the agreement," French President Emmanuel Macron, German Chancellor Angela Merkel and British Prime Minister Theresa May said in a joint statement.
In Brussels, Federica Mogherini, the EU foreign policy chief, said the Iran deal is an international agreement and "it is not up to any single country to terminate it."
In a statement after Trump's speech, Russia's foreign ministry said there was no place in international diplomacy for "threatening" and "aggressive" rhetoric, adding that such methods were doomed to fail.
"It is a hangover from the past, which does not correspond to modern norms of civilised dealings between countries," the statement said.
"We viewed with regret the decision of the US President not to confirm to Congress that Iran is fulfilling in good faith" the nuclear deal, it added.
During an appearance on CNN’s “State of the Union” on Sunday, Secretary of State Rex Tillerson claimed the US is trying to stay in the Iran nuclear deal while hoping to achieve more from it, days after President Donald Trump threatened to pull the US out of the agreement.
The 2015 deal, reached between Iran and the United States, Britain, France, Germany, Russia and the European Union, saw Tehran curtailing its nuclear program in exchange for the easing of crippling economic sanctions.
In an amusing development, Trump has urged lawmakers to adopt a bill co-sponsored by Senator “Little” Bob Corker (who has recently traded barbs with the president after saying he wouldn’t seek another term in the senate) that would impose so-called “triggers” like Iran continuing its provocative missile launches, or advancing its nuclear-enrichment capabilities to the point to where it could build a nuclear bomb in a year’s time. Any of these actions would result in sanctions immediately being reimposed.
The US's allies – not to mention President Donald Trump's political enemies – have insisted that Trump's decision to throw a wrench in the works of the deal could lead to its collapse, which in turn would result in Iran resuming its nuclear program, reviving the possibility of a future military showdown with a nuclear-armed Iran.
- Car-Bomb Kills "One-Woman WikiLeaks" Who Led The Panama Papers Revelations
Meet Daphne Caruana Galizia, the journalist who led the Panama Papers investigation into corruption in Malta.
A blogger whose posts often attracted more readers than the combined circulation of the country’s newspapers, Caruana Galizia was recently described by Politico as a “one-woman WikiLeaks”.
To John Dalli, a former European commissioner whom she helped bring down in a tobacco lobbying scandal, Galizia is “a terrorist.”
To opposition MPs, she’s a political force of nature, one who fortunately has her guns aimed at the other side of the aisle.
“She single-handedly brought the government to the verge of collapse,” says one MP. “The lady has balls,” says another.
Galizia’s mantra was simple: blog relentlessly about the “cronyism that is accepted as something normal here. I can’t bear to see people like that rewarded.”
Her blogs were a thorn in the side of both the establishment and underworld figures that hold sway in Europe’s smallest member state.
Well, sadly, all that is over now, as Galizia was killed today when her car, a Peugeot 108, was destroyed by a powerful explosive device which blew the car into several pieces and threw the debris into a nearby field.
As The Guardian reports, her most recent revelations pointed the finger at Malta’s prime minister, Joseph Muscat, and two of his closest aides, connecting offshore companies linked to the three men with the sale of Maltese passports and payments from the government of Azerbaijan.
No group or individual has come forward to claim responsibility for the attack.
Malta’s president, Marie-Louise Coleiro Preca, called for calm.
“In these moments, when the country is shocked by such a vicious attack, I call on everyone to measure their words, to not pass judgment and to show solidarity,” she said.
“Everyone knows Ms Caruana Galizia was a harsh critic of mine,” Muscat at a hastily convened press conference, “both politically and personally, but nobody can justify this barbaric act in any way”.
The Nationalist party leader, Adrian Delia – himself the subject of negative stories by Caruana Galizia – claimed the killing was linked to her reporting.
“A political murder took place today,” Delia said in a statement.
“What happened today is not an ordinary killing. It is a consequence of the total collapse of the rule of law which has been going on for the past four years.”
Responding to news of the attack, the German MEP Sven Giegold, a leading figure in the parliament’s Panama Papers inquiry, said he was “shocked and saddened”.
“It is too early to know the cause of the explosion but we expect to see a thorough investigation,” said Giegold.
“Such incidents bring to mind Putin’s Russia, not the European Union. There can be absolutely no tolerance for violence against the press and violations of the freedom of expression in the European Union.”
It doews make one wonder just what is happening in Europe, as Greece's former finance minister tweeted…
21st century Europe: Execution in Malta of activist exposing tax cheats. Racism triumphing in Austria. And political arrests in Catalonia.
— Yanis Varoufakis (@yanisvaroufakis) October 16, 2017
//platform.twitter.com/widgets.js
Interesintgly, Muscat announced in parliament that FBI officers were on their way to Malta to assist with the investigation, following his request for outside help from the US government.
Caruana Galizia was 53 and leaves a husband and three sons.
- WORLD’S LARGEST OIL COMPANIES: Deep Trouble As Profits Vaporize While Debts Skyrocket
By the SRSrocco Report,
The world’s largest oil companies are in serious trouble as their balance sheets deteriorate from higher costs, falling profits and skyrocketing debt. The glory days of the highly profitable global oil companies have come to an end. All that remains now is a mere shadow of the once mighty oil industry that will be forced to continue cannibalizing itself to produce the last bit of valuable oil.
I realize my extremely unfavorable opinion of the world’s oil industry runs counter to many mainstream energy analysts, however, their belief that business, as usual, will continue for decades, is entirely unfounded. Why? Because, they do not understand the ramifications of the Falling EROI – Energy Returned On Invested, and its impact on the global economy.
For example, Chevron was able to make considerable profits in 1997 when the oil price was $19 a barrel. However, the company suffered a loss in 2016 when the price was more than double at $44 last year. And, it’s even worse than that if we compare the company’s profit to total revenues. Chevron enjoyed a $3.2 billion net income profit on revenues of $42 billion in 1997 versus a $497 million loss on total sales of $114 billion in 2016. Even though Chevron’s revenues nearly tripled in twenty years, its profit was decimated by the falling EROI.
Unfortunately, energy analysts, who are clueless to the amount of destruction taking place in the U.S. and global oil industry by the falling EROI, continue to mislead a public that is totally unprepared for what is coming. To provide a more realistic view of the disintegrating energy industry, I will provide data from seven of the largest oil companies in the world.
The World’s Major Oil Companies Debt Explode Since The 2008 Financial Crisis
To save the world from falling into total collapse during the 2008 financial crisis, the Fed and Central Banks embarked on the most massive money printing scheme in history. One side-effect of the massive money printing (and the purchasing of assets) by the central banks, was that it pushed the price of oil to a record $100+ a barrel for more than three years. While the large oil companies reported handsome profits due to the high oil price, many of them spent a great deal of capital to produce this oil.
For instance, the seven top global oil companies that I focused on made a combined $213 billion in cash from operations in 2013. However, they also forked out $230 billion in capital expenditures. Thus, the net free cash flow from these major oil companies was a negative $17 billion… and that doesn’t include the $44 billion they paid in dividends to their shareholders in 2013. Even though the price of oil was $109 in 2013; these seven oil companies added $45 billion to their long-term debt:
As we can see, the total amount of long-term debt in the group (Petrobras, Shell, BP, Total, Chevron, Exxon & Statoil) increased from $227 billion in 2012 to $272 billion in 2013. Isn’t that ironic that the debt ($45 billion) rose nearly the same amount as the group’s dividend payouts ($44 billion)? Of course, we can’t forget about the negative $17 billion in free cash flow in 2013, but here we see evidence that the top seven global oil companies were borrowing money even in 2013, at $109 a barrel oil, to pay their dividends.
Since the 2008 global economic and financial crisis, the top seven oil companies have seen their total combined debt explode four times, from $96 billion to $379 billion currently. You would think with these energy companies enjoying a $100+ oil price for more than three years; they would be lowering their debt, not increasing it. Regrettably, the cost for companies to replace reserves, produce oil and share profits with shareholders was more than the $110 oil price.
There lies the rub….
One of the disadvantages of skyrocketing debt is the rising amount of interest the company has to pay to service that debt. If we look at the chart above, Brazil’s Petrobras is the clear winner in the group by adding the most debt. Petrobras’s debt surged from $21 billion in 2008 to $109 billion last year. As Petrobras added debt, it also had to pay out more to service that debt. In just eight years, the annual interest amount Petrobras paid to service its debt increased from $793 million in 2008 to $6 billion last year. Sadly, Petrobras’s rising interest payment has caused another nasty side-effect which cut dividend payouts to its shareholders to ZERO for the past two years.
Petrobras Annual Dividend Payments:
2008 = $4.7 billion
2009 = $7.7 billion
2010 = $5.4 billion
2011 = $6.4 billion
2012 = $3.3 billion
2013 = $2.6 billion
2014 = $3.9 billion
2015 = ZERO
2016 = ZERO
You see, this is a perfect example of how the Falling EROI guts an oil company from the inside out. The sad irony of the situation at Petrobras is this:
If you are a shareholder, you’re screwed, and if you invested funds (in company bonds, etc.) to receive a higher interest payment, you’re also screwed because you will never get back your initial investment. So, investors are screwed either way. This is what happens during the final stage of collapsing oil industry.
Another negative consequence of the Falling EROI on these major oil companies’ financial statements is the decline in profits as the cost to produce oil rises more than the economic price the market can afford.
Major Oil Companies’ Profits Vaporize… Even At Higher Oil Prices
To be able to understand just how bad the financial situation has become at the world’s largest oil companies, we need to go back in time and compare the industry’s profitability versus the oil price. To find a year when the oil price was about the same as it was in 2016, we have to return to 2004, when the average oil price was $38.26 versus $43.67 last year. Yes, the oil price was lower in 2004 than in 2016, but I can assure you, these oil companies weren’t complaining.
In 2004, the combined net income of these seven oil companies was almost $100 billion….. $99.2 billion to be exact. Every oil company in the group made a nice profit in 2004 on a $38 oil price. However, last year, the net profits in the group plunged to only $10.5 billion, even at a higher $43 oil price:
Even with a $5 increase in the price of oil last year compared to 2004, these oil companies combined net income profit fell nearly 90%. How about them apples. Of the seven companies listed in the chart above, only four made profits last year, while three lost money. Exxon and Total enjoyed the highest profits in the group, while Petrobras and Statoil suffered the largest losses:
Furthermore, the financial situation is in much worse shape because “net income” accounting does not factor in the companies’ capital expenditures or dividend payouts. Regardless, the world’s top oil companies’ profitability has vaporized even at a higher oil price.
Now, another metric that provides us with more disturbing evidence of the Falling EROI in the oil industry is the collapse of the “Return On Capital Employed.” Basically, the Return On Capital Employed is just dividing the company’s earnings (before taxes and interest) by its total assets minus current liabilities. In 2004, the seven companies listed above posted between 20-40% Return On Capital Employed. However, this fell precipitously over the next decade and are now registering in the low single digits:
In 2004, we can see that BP had the lowest Return On Capital Employed of 19.68% in the group, while Statoil had the highest at 46.20%. If we throw out the highest and lowest figures, the average for the group was 29%. Now, compare that to the average of 2.4% for the group in 2016, and that does not including BP and Chevron’s negative returns (shown in Dark Blue & Orange).
NOTE: I failed to include the Statoil graph line (Magenta) when I made the chart, but I added the figures afterward. For Statoil to experience a Return On Capital Employed decline from 46.2% in 2004 to less than 1% in 2016, suggests something is seriously wrong.
We must remember, the high Return On Capital Employed by the group in 2004, was based on a $38 price of oil, while the low single-digit returns by the oil companies in 2016 were derived from a higher price of $43. Unfortunately, the world’s largest oil companies are no longer able to enjoy high returns on a low oil price. This is bad news because the market can’t afford a high oil price unless the Fed and Central Banks come back in with an even larger amount of QE (Quantitative Easing) money printing.
I have one more chart that shows just how bad the Falling EROI is destroying the world’s top oil companies. In 2004, these seven oil companies enjoyed a combined net Free Cash Flow minus dividends of a positive $34 billion versus a negative $39.1 billion in 2016:
Let me explain these figures. After these oil companies paid their capital expenditures and dividends to shareholders in 2004, they had a net $34 billion left over. However, last year these companies were in the HOLE for $39.1 billion after paying capital expenditures and dividends. Thus, many of them had to borrow money just to pay dividends.
To understand how big of a change has taken place at the oil companies since 2004, here are the figures below:
Top 7 Major Oil Companies Free Cash Flow Figures
2004 Cash From Operations = …………$139.6 billion
2004 Capital Expenditures = ……………..$67.7 billion
2004 Free Cash Flow = ………………………$71.9 billion
2004 Shareholder Dividends = …………..$37.9 billion
2004 Free Cash Flow – Dividends = $34 billion
2016 Cash From Operations = ……………..$118.5 billion
2016 Capital Expenditures = ………………..$117.5 billion
2016 Free Cash Flow = …………………………..$1.0 billion
2016 Shareholder Dividends = ……………….$40.1 billion
2016 Free Cash Flow – Dividends = -$39.1 billion
Here we can see that the top seven global oil companies made more in cash from operations in 2004 ($139.6 billion) compared to 2016 ($118.5 billion). That extra $21 billion in operating cash in 2004 versus 2016 was realized even at a lower oil price. However, what has really hurt the group’s Free Cash Flow, is the much higher capital expenditures of $117.5 billion in 2016 compared to the $67.7 billion in 2004. You will notice that the net combined dividends didn’t increase that much in the two periods… only by $3 billion.
So, the lower cash from operations and the higher capital expenditures have taken a BIG HIT on the balance sheets of these oil companies. This is precisely why the long-term debt is skyrocketing, especially over the past three years as the oil price fell below $100 in 2014. To continue making their shareholders happy, many of these companies are borrowing money to pay dividends. Unfortunately, going further into debt to pay shareholders is not a prudent long-term business model.
The world’s major oil companies will continue to struggle with the oil price in the $50 range. While some analysts forecast that higher oil prices are on the horizon, I disagree. Yes, it’s true that oil prices may spike higher for a while, but the trend will be lower as the U.S. and global economies start to contract. As oil prices fall to $40 and below, oil companies will begin to cut capital expenditures even further. Thus, the cycle of lower prices and the continued gutting of the global oil industry will move into high gear.
There is one option that might provide these oil companies with a buffer… and that is a new even larger Fed and Central Bank money printing scheme which would result in severe inflation and possibly hyperinflation. But, that won’t be a long-term solution, instead just another lousy band-aid in a series of band-aids that have only postponed the inevitable.
The coming bankruptcy of the once mighty global oil industry will be the death-knell of the world economy. Without oil, the global economy grinds to a halt. Of course, this will not occur overnight. It will take time. However, the evidence shows that a considerable wound has already taken place in an industry that has provided the world with much-needed oil for more than a century.
Lastly, without trying to be a broken record, the peak and decline of global oil production will destroy the value of most STOCKS, BONDS and REAL ESTATE. If you have placed most of your bests in one of these assets, you have my sympathies.
Check back for new articles and updates at the SRSrocco Report.
- Ex-DEA Agent Blasts Congress And Drug Industry For Creating The Opioid Crisis
Authored by Mac Slavo via SHTFplan.com,
Whistleblower Joe Rannazzisi is telling all when it comes to placing blame for the nation’s opioid crisis. He says drug distributors pumped opioids into communities in the United States knowing that people were dying and that the US government is helping.
Joe Rannazzisi is a tough and blunt former DEA (Drug Enforcement Administration) deputy assistant administrator with a law degree, a pharmacy degree, and a growing rage at the unrelenting death toll from opioids. Congress has often been complicit in atrocities, especially when a politician profits off of the removal of the rights of others. So it should not come as a surprise that Rannazzisi is blaming Congress and the drug industry for the opioid epidemic gripping the nation.
Rannazzisi ran the DEA’s Office of Diversion Control, the division that regulates and investigates the pharmaceutical industry. Now in a joint investigation by 60 Minutes and The Washington Post, Rannazzisi tells the inside story of how, he says, the opioid crisis was allowed to spread. Its quick spread was also aided by Congress, lobbyists, and a drug distribution industry that shipped, almost unchecked, hundreds of millions of pills to rogue pharmacies and pain clinics providing the rocket fuel for a crisis that, over the last two decades, has claimed 200,000 lives.
The DEA responded to the explosive report that the government is helping keep Americans addicted to opioids so that pharmaceutical companies can continue to boast big profits. The DEA says it has taken actions against far fewer opioid distributors under a new law. A Justice Department memo shows 65 doctors, pharmacies, and drug companies received suspension orders in 2011. Only six of them have gotten them this year.
“During the past seven years, we have removed approximately 900 registrations annually, preventing reckless doctors and rogue businesses from making an already troubling problem worse,” the DEA said in a written statement.
“Increasingly, our investigators initiated more than 10,000 cases and averaged more than 2,000 arrests per year.”
But Rannazzisi says this is an industry that is out of control and the DEA isn’t making a dent in this crisis.
“What they [big pharma] wanna do, is do what they wanna do, and not worry about what the law is. And if they don’t follow the law in drug supply, people die. That’s just it. People die.”
The harsh reality is that the burgeoning issue of the opioid epidemic is lining the pockets of the pharmaceutical industry and the politicians who help fuel it, so there’s no real rush to stem the bleeding of this crisis.
“This is an industry that allowed millions and millions of drugs to go into bad pharmacies and doctors’ offices, that distributed them out to people who had no legitimate need for those drugs,” Rannazzisi said.
Most of his anger is reserved for the distributors of opioid drugs. Some of them are actually multibillion-dollar, Fortune 500 companies. They are the middlemen that ship the pain pills from manufacturers, like Purdue Pharma and Johnson & Johnson to drug stores all over the country. Rannazzisi accuses the distributors of fueling the opioid epidemic by turning a blind eye to pain pills being diverted to illicit use.
“This is an industry that allowed millions and millions of drugs to go into bad pharmacies and doctors’ offices, that distributed them out to people who had no legitimate need for those drugs,” Rannazzisi said.
“The three largest distributors are Cardinal Health, McKesson, and AmerisourceBergen. They control probably 85 or 90 percent of the drugs going downstream,” he added when prompted.
Rannazzisi said it’s a “fact” that the big pharmaceutical companies knew they were pumping drugs into people unnecessarily for profits and that people were dying.
In the late 1990s, opioids like oxycodone and hydrocodone became a routine medical treatment for chronic pain. Drug companies assured doctors and congressional investigators that the pain medications were effective and safe. With many doctors convinced the drugs posed few risks, prescriptions skyrocketed and so did addiction.
Big pharma had a plan. It was solely a business plan. Their plan was to sell a lotta pills and make a lot of money. And they did both of those very well.
- Move To Digital Currencies Accelerates As PBoC Successfully Tests Algos For Digital Money
In a story that seems to have gone largely unnoticed by the western press, the China Daily reported that the PBoC has successfully designed a prototype that can regulate its future supply of digital fiat currency.
In a report, “PBoC inches closer to digital currency”, the newspaper stated that China’s central bank “has completed trial runs on the algorithms needed for digital currency supply, taking it a step closer to addressing the technological challenges associated with digital currencies, according to a top official associated with the project.”
China’s has been preparing for digital currency since 2016. In June this year, the PBoC “finished several digital money trials involving fake transactions between it and some of the country’s commercial banks.” Given over-invoicing of imports and the shenanigans in the shadow banking/WMP sector, we suspect that the commercial banks took to these trials like proverbial flies to feces.
The China Daily article goes on to suggest that, while there is no timetable, “China is likely to become the first country that would deploy a digital fiat currency.”
Far be it for us to question the accuracy of the China Daily – which Wikipedia notes is often used as a guide to Chinese government policy – but we were expecting Sweden (already the world’s most cashless society) to be first. It has been widely reported that the introduction of an “e-krona” is being investigated by the Riksbank. Forbes noted last month that “The inquiry is expected to be finalized in late 2019.” It would not replace cash, which accounts for 1% of transactions in Sweden according to a recent BBC report, but operate alongside physical cash initially.
So…while China expects to be first, it will be “some time before the currency goes public”. According to Di Gang, a senior engineer of the Institute of Digital Money at the PBOC, a number of concerns need to be solved like “managing risks and improving efficiency.” He added that “the government also needs to factor whether the public would use the currency.”
We know the answer to that.
Yes, although it would be much quicker if Chinese citizens could somehow use it to get their savings out of the country.
Back to the serious work of the PBoC’s Institute of Digital Money. Yao Qian, the director-general no less, said that the successful simulation of money supply had paved the way for the central bank to become the future sole regulator and policymaker governing the value of digital currency. That sounded like a veiled explanation for the recent heavy-handed clampdown on Bitcoin trading in the Middle Kingdom. Indeed, the story notes that “Unlike Bitcoin or other digital money issued by the private sector, the digital fiat currency has the same legal status as the Chinese yuan”
As this will be a government-backed digital currency, we wonder whether Jamie Dimon will be an investor or early adopter? Alternatively, he might be able to buy a Russian version in due course.
Yesterday, Cointelegraph reported that local news sources in Russia had been informed by the Minister of Communications, Nikolay Nikiforov, that President Putin has approved a plan for the issue of a “CrypoRuble.” There was no detail, however, on timeline and no any subsequent confirmation that we’ve seen. Coincidentally, or not, Nikiforov is quoted as saying “I confidently declare that we run (sic) CryptoRuble for one simple reason: if we do not, then after 2 months our neighbors in the EurAsEC will.”
So, the world might be moving towards digital, sovereign-backed currencies faster than many people realized. For the time being, however, Bitcoin and its private sector rivals continue to have the playing field to themselves.
Portfolio managers who want exposure to the cryptos either remain on the sidelines or, as Cathie Wood, CEO, CIO and Founder, of Ark Investment Management, said on Bloomberg TV earlier, are forced to pay a premium via the GBTC (Bitcoin Investment Trust).
Wood commented that “We are a registered investment company, Ark Invest, we can only own financial securities…our funds own GBTC which sells at a premium to the underlying bitcoin investment trusts…the premium is because of the scarcity value. In my IRA, for example, I can’t get any to crypto, except through a GBTC. No one can and the same with our funds…We’ve tried to buy the underlying, but the New York Stock Exchange preferred a traded security and that’s how we ended up with a GBTC.”
As the Bloomberg guests went on to discuss, the situation may not change unless and until Bitcoin futures are approved by the CFTC, perhaps in early/mid-2018. That could pave the way for the currently stalled approvals for ETFs with the SEC and bring additional institutional capital into crypto.
- 7 Years & Counting – Trump's Looming EV Time-Bomb
Authored by Eric Peters via EricPetersAutos.com,
In just seven years’ time – unless Trump does something before his four years are up – the average fuel efficiency of the average car will have to almost double. From 35.5 MPG (now) to 54.5 MPG by 2025. So reads the fuel economy fatwa issued by Trump’s predecessor.
No matter how much it costs, no matter what it takes.
To put this in perspective, as of 2018, there is only one car available that is capable of meeting the 2025 “goal” – as these forced-on-us things are styled: It is the Toyota Prius Prime plug-in hybrid. Nothing else comes close.
Well, except electric cars.
These average infinity – as far as gas consumption goes. Which is very helpful insofar as the averages. The federal fuel economy fatwa is formally the Corporate Average Fuel Economy (CAFE) standard, which is an arbitrary number pulled out of a hat by federal regulatory ayatollahs, who have somehow become the arbiters of how much fuel the cars we buy ought to use.
Those cars which use more gas than the arbitrarily decreed figure are subject to punitive “gas guzzler” fines meant specifically to discourage their manufacture as well as their purchase, by making them artificially more expensive to manufacture and more expensive to buy.
In case you wondered, this is why larger vehicles and vehicles with larger engines are becoming both scarce and exotically priced. If you’re young – 30 or less – you probably will not remember but there was a time when most Americans, including working-class Americans, routinely drove large cars with large engines. Bought them brand-new. Smaller cars with smaller engines were also available, but people bought them because that’s what they wanted – not because they were forced to by government fatwas that put larger and larger-engined cars out of their reach, as today.
It is also why suburbanites routinely drive SUVs today. “SUVs” are a made-up class of vehicle that did not exist prior to the CAFE fatwa. The class was made-up by the car industry as a way to get around the fatwa – which (at the time) granted a partial exemption to what were then just trucks, which were considered work vehicles. But if you enclosed the truck’s bed and added seats – you could carry people. Voila!
The SUV.
It took Uncle a few years to catch on – and for the CAFE regs to catch up. In the interim, vast fleets of SUVs hit the streets, because people still wanted large vehicles with large engines and the truck-derived SUV’s ground clearance and available 4×4 only made the combo even more appealing. Certainly more so than the “downsized” (and down-engined) cars the car companies were being forced to build, even though the demand was elsewhere.
Uncle did catch up, of course. The fatwa was changed to envelope SUVs and other “light trucks.” They are now on the endangered species list, too.
As are mid-sized cars with mid-sized engines. It is no random thing that six cylinder engines, which were as recently as two years ago abundantly available in the mid-sized/family car class of vehicle – are becoming extremely uncommon, if not unavailable. Most of the cars which used to offer them – examples include the Mazda6 and Honda Accord – no longer do.
Deep within the EPA . . .
Just as – a generation ago – V8s were all-but-eliminated from the mid-priced/family car class.
The current fatwa – 35.5 MPG on average – is already a bar too high. None shall pass. Not without radical redesigns, already becoming obvious in the person of nine and ten speed transmissions and aluminum bodies and other such artifices of desperation. Inevitably, diminution in power and capability and also size will have to be resorted to – to get from 35.5 to 54.5 MPG.
That, or build far fewer larger (and even medium-sized) cars. And even fewer trucks and SUVs.
Or, build lots of electric cars.
Averages, remember.
This is the practical reason behind the weirdly sudden bum’s rush by every major car manufacturer to build electric cars. As many as possible – even if they don’t sell. Even if they have to be given away at a considerable loss per car (the loss made up by tax write-offs, “carbon credits” and other subsidies).
Because each electric car – which uses no gas at all – is extremely helpful mathematically, as a regulatory dodge – even if a disaster economically and practically. The presence of one EV on the left side of the scale balances the SUV (or even the car) on the right side of the scale. The more they build of the one, the more they can sell of the other.
It is the only way.
Because there is no other way that any car – except a very small hybrid car – is ever going to average 54.5 MPG. Not without extreme lightening up, at least – which will never happen because then the car would be “unsafe” – not able to comply with all the federal bumper-impact, roof crush and other such fatwas.
Or with a diesel – which the regulatory ayatollahs have also effectively outlawed.
So without vast fleets of electric cars to balance out the scales, other-than-small (and small-engined) cars will become much harder to justify building at all, because their cost to buy will become exorbitant, such that very few people will be able to afford them.
Yet people still want the larger (and larger-engined) cars. Notice the demand for “gas guzzlers’ has not slackened, which must frustrate the fuel efficiency fatwa-issuers. Who are determined to force fuel economy down people’s throats no matter how much they didn’t ask for it.
Here’s where Trump comes in – or could.
He is, after all, the elected representative of the people – to invoke the monk-chant of “democracy” – while the regulatory ayatollahs represent no one except themselves and perhaps a few Claybrookian Clover types who are simpatico with the idea of forcing other people to do as they think best even when it’s none of their business and they ought to just mind their own.
Trump could – and should – simply countermand the CAFE fatwa. Tear the thing up, throw the pieces up over his head, confetti style. It was not, after all, passed by Congress – the representatives of the people. It was imposed by regulatory bureaucrats.
If we truly do live in a democracy – as we are constantly told – then the will of the people ought to prevail.
This would, of course, trigger wild ululations among the ayatollahs but wouldn’t that be almost as gratifying as a really top-drawer steak dinner with all the trimmings?
Trump would probably also assure his re-election, despite everything – because the people give a damn. Not about fuel efficiency. But about being left free to buy the type of car – or SUV – that meets their needs.
The ayatollahs be damned.
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- Is This The Bizarre Reason Why Tesla Is Struggling To Ramp Model 3 Production?
A little over a week ago, we noted the damning – if unsurprising – report from the Wall Street Journal revealing that Tesla’s massive production miss on the Model 3, after only producing a tiny fraction of the 1,500 Model 3 sedans that it promised customers, might have been attributable to the fact that key parts of the cars were still being assembled by hand.
But according to a new report from the WSJ and Automotive News this morning, the real problem with Tesla’s Model 3 production might be even more basic and embarrassing…the company can’t figure out how to weld steel.
What’s behind Tesla’s manufacturing woes? It could be something as simple as steel.
Based on details in a Wall Street Journal report and in a video of the production line posted on Twitter by Tesla CEO Elon Musk, experts say the electric vehicle maker appears to be struggling with welding together a mostly steel vehicle, as opposed to the primarily aluminum bodies of the Model S and Model X.
The Model 3’s aluminum and steel body requires more welding rather than the adhesive and rivets in aluminum bodies, experts say.
Harbour described the difference between the body of the Model 3 and those of the Model S and Model X as “partly cloudy vs. partly sunny.” The change in materials would require processes new to Tesla.
“There’s a big difference there. They haven’t been doing a lot of spot welding on the first two vehicles because they’re all aluminum,” Harbour said. “The learning curve is pretty steep.”
As automotive manufacturing consultant Michael Tracy of Agile Group pointed out, the clues of Tesla’s steel problems came from a video posted by Musk himself of the Model 3 assembly line. Referencing Musk’s video, Tracy said a well functioning auto assembly line would not produce the sparks seen in the video below which are symptomatic of welds spots overheating or poor alignment of components.
After the Journal report, Musk tweeted a of the Model 3 production line, which was operating at one-tenth of its potential speed. In the video, sparks fly as two robotic arms assemble parts of the vehicle frame. He followed with another on Wednesday, Oct. 11, showing body panel stamping at full speed.
“Resistance welding should make a little smoke, but when you see stuff popping out like that, that’s called expulsion,” automotive manufacturing consultant Michael Tracy of Agile Group in Howell, Mich., said of the first video. “It’s symptomatic of weld spots getting too hot because they’re poorly planned, or in this case, the metal not being pulled all the way together.”
Poor welds can increase the damage to a vehicle in an accident, and can lead to rattling and squeaking as the car ages, Tracy said.
//platform.instagram.com/en_US/embeds.js
Meanwhile, Tracy says that mistakes like these are things that most auto OEMs would catch and fix 6 months before production launch…which raises the question “is the expertise there?”
Tracy said slowed assembly lines do little to prove production is running smoothly because lines perform differently when running at full speed.
“At this point, you would only be running it slow if you were having troubles and you were afraid the welds you were going to make weren’t going to be good,” Tracy said. “It has to be able to run at rate for acceptance testing.”
The types of problems Tesla is dealing with are normally worked out long before the assembly line is expected to be working at capacity, Harbour said.
“This is something a plant typically goes through four to six months in advance of a production launch,” Harbour said. “This raises the question: ‘Is the expertise there?'”
Of course, as we’ve pointed out multiple times of late (see: Porsche And Mercedes Plot Musk Offensive With “Anything Tesla Can Do, We Can Do Better” Strategy), Tesla has historically been somewhat shielded from the negative financial consequences of their manufacturing inefficiencies because they’ve been the only EV game in town…but that’s all about to change in a big way.
With an influx of competitive EVs on the horizon, Tesla must iron out its manufacturing problems in the next few months or risk losing its competitive edge before the Model 3 reaches a larger audience.
“Before, there was only Tesla. Now, there’s going to be dozens of alternatives,” said Ron Harbour, a manufacturing consultant at Oliver Wyman. “They’re going to have to get really efficient at manufacturing. They have to be cost competitive and price competitive to stay in the business.”
Since July, automakers have been one-upping each other on plans to electrify their lineups. Volvo said it would introduce only electrified vehicles starting in 2019. Jaguar Land Rover said it would offer electrified versions of all of its vehicles by 2020. BMW expects to be able to mass-produce EVs by 2020, offering 12 models by 2025. Mercedes said it will electrify its lineup by 2022.
Detroit also has been turning its attention to electrification. Ford Motor Co. plans to introduce 13 electrified vehicles in the next five years, including a crossover with 300 miles of range. General Motors introduced the Chevrolet Bolt last year, with at least 20 all-electric or hydrogen fuel cell vehicles coming by 2023 — two such vehicles will be introduced in the next 18 months.
Perhaps this is why Daimler’s CEO didn’t seem to be all that worried about having a manufacturing competition with Tesla?
- "We Don't Know How To Replace The Vast Gold Deposits Of The Past"
Authored by Christoff Gisiger via Finanz und Wirthschaft,
Pierre Lassonde, chairman of Franco-Nevada, expects production in the gold mining sector to decline significantly and foresees a price push for the yellow metal.
Few people have achieved more success in the mining business than Pierre Lassonde. The savvy Canadian is the co-founder and chairman of Toronto based Franco-Nevada (FNV 99.91 -0.94%) and pioneered the royalty business model in the gold mining sector based on the model used in the oil-and-gas industry. For investors this strategy has paid off golden returns. Today however, Mr. Lassonde points out that the gold industry hasn’t made any large discoveries for years which will put heavy upward pressure on prices in the years to come. He also thinks that US President Donald Trump is good for the yellow metal and that investors will fare better with gold than with stocks.
Mr. Lassonde, after a few difficult years gold seems to get its shine back. What’s next for the gold price?
Right now, there is more demand for paper gold than for physical gold. For instance, when you look at the refineries in Switzerland they will tell you that they’ve got the bouillon but they’re not busy. It’s not like a year and half ago when they had no stock and the gold bars basically were flying off their shelf the minute they were produced. So the pressure is in the paper gold market, the futures market.What’s the reason for that?
Part of the recent strength of gold is what I call a risk premium on the world. There is a lot of speculation that has to do with the tensions around North Korea and President Trump. I don’t have a personal relationship with Mr. Trump but I know the man a little bit. When he was elected, my prediction was that he was going to tie up the US administration in a knot because he’s totally unpredictable. Nobody knows where he’s going and you cannot run a country that way.And what does this have to do with gold?
Anyone else in the Oval Office would not make such outlandish statements as Mr. Trump makes. Gold is benefiting from that. After the US election, my prediction was that the dollar was going to suffer from Mr. Trump being in office. The price of gold is intimately related to the dollar. Gold is essentially the »anti-dollar»: If the dollar is strong, gold is weak and if the dollar is weak, gold is strong. So what we are seeing now is exactly what I have expected: a lower dollar and therefore a stronger gold price.So where do you think the gold will go from here?
My view has been between $1250 to $1350 per ounce for this year and then slightly ramping up next year to around $1300 to $1400. But for gold to get into the next real bull market we need signs of inflation. So far we haven’t seen them. The Federal Reserve and other central banks have piled up huge reserves. But there is no inflation because the money is sitting within the banks and they are not lending it. Therefore, you don’t get a multiplier effect. But what happened recently in the US – the one-two punch with respect to the hurricanes »Irma» and »Harvey» – is going to require an enormous amount of reconstruction. This could finally move the needle on inflation. Also, Europe is doing much better. So at some point I suspect we are going to see inflation start to pick up a little bit.What does this mean for the mining industry?
First of all, at a gold price of $1300 the industry by and large is doing well. I tell my peers: »If you are not making money at $1300 you should not be in this business.» So it’s a good price and you should be making good money. But the industry has had to shrink a lot. When the gold price dropped to $1000 at the end of 2015 everybody in the business was too fat. So the industry laid people off, consolidated, shrunk and many junior companies have been wiped out.What are the consequences of that?
Production is declining and this is going to put an enormous amount of pressure on prices down the road. If you look back to the 70s, 80s and 90s, in every of those decades the industry found at least one 50+ million ounce gold deposit, at least ten 30+ million ounce deposits and countless 5 to 10 million ounce deposits. But if you look at the last 15 years, we found no 50 million ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits. So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know. We do not have those ore bodies in sight.Why aren’t there any large discoveries anymore?
What the industry has not done anywhere near enough is to put money back into exploration. They have not put anywhere near enough money into research and development, particularly for new technologies with respect to exploration and processing. The way our industry works is it takes around seven years for a new mine to ramp up and then come to production. So it doesn’t really matter what the gold price will do in the next few years: Production is coming off and that means the upward pressure on the gold price could be very intense.Why didn’t the industry put more money into exploration?
The industry has had to shrink a lot. Also, the boom in Exchange Traded Funds has changed the capital markets in a huge way: Companies that are part of an ETF get treated like chosen sons. But when you’re not in an ETF you’re getting marginalized. You become an orphan and the junior companies in particular have been completely orphaned.How does that impact the funding of mining?
The thing with this industry is that you have to have an incredible amount of patience and you have to have money. And right now, it’s hard to get money. The risk appetite of investors has been gone for many, many years. If you are not one of the chosen few you can’t get money. You sit on the sideline and wait. In the past, more than half of the new discoveries have been made by junior companies. But they haven’t had any money now for like 10 years. So how are you going to find anything if you don’t fund the junior companies?…
What’s your advice for investors who are interested in gold?
It’s very interesting. When you look over a hundred years back there are periods of 10 to 30 years where you would rather be in the stock market. But then, there are other periods from 10 to 15 years where you would rather be in gold.In which period are we today?
Let’s take the Dow Jones Industrial. To my mind, the Dow is essentially an expression of financial assets. Gold on the other hand is what represents hard assets: real estate, paintings and other hard assets. So when you look at the gold cycle from 1966 to 1980, you can see that the ratio between the Dow and the gold price at the beginning topped out at almost 28:1: It took 28 units of gold to buy one unit of the Dow. Then the long term trend reversed and the ratio went all the way down to 1:1. A similar cycle took place in the 30s. The Dow crashed from around 360 in 1929 to 36 in the next years. So it lost like 90% of its value. On the other hand, the gold price went from 20 to 34 and the ratio essentially bottomed out at almost 1:1, like at the end of 1966 to 1980 cycle.
And what does that mean for investors today?
Today, the Dow is over 22,000 and the price of gold is around $1300. This equals a ratio of almost 18:1 and you can clearly see that the trend is starting to roll over. So what does it mean if we go down to a ratio of 1:1 once again? The gold price would hit a big number and nobody is prepared for that. I don’t know any more than anybody else because it’s about the future. But it happened already twice in the past 100 years. So I think the odds that it’s going to happen a third time are pretty good. History does repeat itself, never exactly in the same fashion, but in the same form. Therefore, I would rather own a little bit more gold than not. So I think for an average investor, it should be the absolute rule to hold around 5 to 10% gold in your portfolio, like rule number one.
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