September 22, 2019

US beats Switzerland in ‘richest nation’ rating, while global wealth slumps due to trade war & Brexit

According to the latest Global Wealth Report published by German insurer Allianz, the average net financial assets of people living in the United States is €184,411 (US$203,128) per capita against €173,838 for Switzerland. The figures given are for 2018.

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The rise of the US to the top of the wealth list is largely due to the strength of the dollar, the report claims. It also states that US households are the main driver in the increase in the global flow of funds – two-thirds of all savings in industrialized countries originated in the US. Fresh savings set a record globally, increasing by 22 percent to more than €2,700 billion. The report attributes this to last year’s US tax reform, which was followed by US citizens upping their fresh savings by an eyebrow-raising 46 percent.

At the same time, while the US took the top spot in the report, Switzerland continues to have the highest gross financial assets per capita in the world at €266,318, against €227,364 for the United States. However, debt in Switzerland is far greater than in the US due to the number of mortgages.

Despite their neck-and-neck performance, both Switzerland and the US are way ahead of third-place Singapore. Its total net financial assets per capita amounted to a mere €100,370.

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Prior to this, the world’s wealth crown was worn by Switzerland, which took it in 2017 – from the United States.

Overall, the Allianz report is rather pessimistic regarding the global wealth outlook, calling it “a sad premiere.” It stated that the world’s financial asset growth in 2018 was down by 0.1 percent for the first time since the financial crisis of 2008, placing the blame on the trade war between US and China, Brexit uncertainty increased geopolitical tensions and “the tightening of monetary conditions.”

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9 Asian states sign deal on cooperation & reforms in energy sphere

The declaration was signed in Tashkent on Saturday by the energy ministers of the Central Asian Regional Economic Cooperation (CAREC) countries. CAREC includes nine Asian states – Afghanistan, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, Pakistan, Tajikistan, and Uzbekistan.

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These countries signed a historic declaration that will accelerate cross-border cooperation on energy issues and bring the region one step closer to creating a regional energy market,” Tatyana Evstifeeva, spokeswoman for the Asian Development Bank (ADB) in Dushanbe, said. ADB operates as the secretariat of the CAREC program. Evstifeeva noted that the declaration sets the region on a “faster path of reforms” which would lead to more liberal energy markets with greater private sector participation and investment.

The ministers also approved a new CAREC energy strategy for the next 10-year period, which will serve as a roadmap for achieving the region’s goal of a secure energy future.

The energy sector stimulates economic growth in the region, which is why this [declaration] is so important. Today they have strengthened their commitment to working together to ensure a reliable and affordable energy supply in the region, develop modern energy markets and use clean energy as a more efficient and sustainable source of energy,” ADB Vice President Divakar Gupta said.

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Some CAREC countries continue to face energy shortages. In order to ensure continued economic growth and to meet the growing demand for energy, the region needs to double its current energy system capacity by 2030. This will require significant investments, estimated at about US$400 billion.

Since its establishment in 2001, nearly 200 regional projects have been funded under the CAREC program, for a total of US$34.5 billion in the transport, energy, and trade sectors. More than a third of this amount was funded by the ADB.

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Cash-strapped Pakistan airline operated 80+ flights with ZERO passengers – media

According to Geo News TV, the airline operated 46 regular flights and 36 Hajj pilgrim flights between 2016 and 2017 with no passengers on board. It suffered an estimated 180 million Pakistan rupees (over $1.1 million) in losses, already cash-strapped due to the unsteady national economy.

The figures were apparently revealed in an internal audit report seen by the news outlet. The report also stated that no internal inquiry was launched regarding the flights despite the administration being aware of the problem.

The reasons for operating empty flights, as well as for the administration ignoring the matter, have not been revealed. The airline is yet to issue an official statement.

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The report comes as Pakistan’s economy faces rising inflation, current account deficits, and downward pressure on its currency. In an attempt to deal with the situation, Pakistan’s Central Bank was forced to raise rates nine times since the start of 2018. Pakistan also secured bailouts, including from the International Monetary Fund, in July to keep the economy afloat. An IMF team arrived in Islamabad earlier this week to review the country’s progress on reforms agreed on as part of the bailout package.

Pakistan also faces the possibility of being blacklisted by the Paris-based anti-money laundering watchdog Financial Action Task Force (FATF) for alleged terrorist financing. The FATF placed Pakistan on its ‘grey list’ of countries with inadequate controls to prevent terrorist funding last year. The rating could damage the country’s investment aspirations or even attract sanctions from international organizations if it is downgraded further. Islamabad has repeatedly denied any connection with militant groups.

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‘Commit all fraud you need as long as you support the US dollar’ – Max Keiser on JP Morgan scandal

‘Commit all fraud you need as long as you support the US dollar’ – Max Keiser on JP Morgan scandalFollow RT on

“Eric Holder, who was attorney general under [former US President Barack] Obama when this first came to light, said that market manipulation and fraud were important for the American economy and that he, as the attorney general, could not prosecute,” the host of RT’s Keiser Report says, calling the JP Morgan fraudsters and the likes “too big to jail.”

And that too-big-to-jail was part of the legal landscape for America, and bankers were getting a green light to commit massive fraud.

The fact that precious metals traders at JP Morgan made millions through fraudulent trades, operating a criminal conspiracy to manipulate prices called ‘spoofing’, has been an open secret for years, with Max himself describing the scheme back in 2011.

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However, not until this week did the Justice Department charge the traders with fraud, as well as “conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity” – a charge normally reserved for members of an organized crime ring. Max Keiser says the near decade of neglect towards this major case has actually been somewhat of an official agenda for the authorities.

That was the message from the Justice Department – commit all the fraud you need as long as you support the US dollar.

“If you need to manipulate the markets and break laws, then we’re going to look the other way because the Justice Department believes that defrauding the markets is sacrosanct with the American way.” Keiser believes the US authorities have always “equated Americanism and capitalism with fraud.”

“Thanks to Eric Holder, Barack Obama and now Donald Trump – this is the American economy,” he states.

However, it is not clear why the Justice Department decided to change course, and whether it may signal a larger crackdown. The department has lost its last two price manipulation cases in court.

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Walmart stops selling e-cigarettes in US as reports of vaping-related deaths soar

According to an internal company memo sent out to Walmart employees on Friday and seen by Reuters, the retailer is concerned with the growing teenage interest in vape-smoking, as well as the alarming number of reports on cases of vaping-related lung disease and deaths.

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It noted that the current uncertainty over regulations regarding vape-smoking at federal, state and local levels also makes it difficult to continue selling vaping-related products.

The data from the US Centers for Disease Control and Prevention (CDC) published earlier this week, shows the number of vaping-related lung disease has risen to 530 probable cases, up from 380 last week. Eight people have so far died from the mysterious ailments attributed to the habit.

The US Food and Drug Administration on Thursday launched a criminal probe into the recent spike in vaping-related illnesses. It has collected more than 150 vaping product samples in order to test them for traces of nicotine, cannabinoids, opioids, pesticides, poisons, toxins and other potentially dangerous substances. 

Walmart’s action on Friday follows bans on sales of flavored vaping products, which are especially attractive to youngsters, in the states of New York and Michigan. Also, President Donald Trump’s administration recently announced plans to remove all flavored e-cigarettes from stores as half of the cases of vaping-related illnesses are people younger than 25, with 16% aged under 18. A congressional subcommittee is scheduled to hold a hearing on the outbreak next Tuesday.

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According to Politico, the government is drafting a bipartisan bill which is to ban vaping flavors other than tobacco, as well as to apply existing tobacco taxes to vaping products and launch a campaign describing the health risks posed by e-cigarettes.

A recent study by the New York State Department of Health suggested that Vitamin E acetate, a thickening agent in THC oil which is inhaled during vape-smoking, is to blame for the lung illnesses. However, leading makers of nicotine e-cigarettes, including Juul Labs Inc, British American Tobacco Plc and Imperial Brands Plc all claim their products do not contain Vitamin E compounds.

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US grants Apple tariff exemptions despite Trump’s earlier no-go

According to the notices published by the Office of the US Trade Representative in the Federal Register on Friday, Apple has been given approval for 10 of its 15 requests for tariff exemptions.

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Although the company builds its new Mac Pro computers on US soil, some structural parts for the devices – like, for instance, circuit boards– are manufactured in China and therefore are subject to Trump’s 25% levies. These circuit boards have been granted a tariff exemption, as have Mac Pro stainless-steel exterior enclosure, finished Magic Mice and Magic Trackpads. Several requests are still under a substantive review by the trade regulator.

Apple had filed formal requests for the exemptions with President Donald Trump’s administration back in July. The company’s reasoning for the desired exemptions in its initial filing was that “there are no other sources for th[ese] proprietary, Apple-designed component[s].” Apple argued that tariffs on its products could reduce its contribution to the US economy and “weigh on Apple’s global competitiveness” as Chinese tech manufacturers are the main competitors of the products Apple makes.

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However, following Apple’s request for special tariff consideration, President Trump initially tweeted that the company would not be given any waivers and told it to make its Mac Pro in the United States.

Apple will not be given Tariff wavers (sic), or relief, for Mac Pro parts that are made in China. Make them in USA, no Tariffs!” Trump’s tweet stated. Following that tweet, the company even saw a slight drop in its shares.

Apart from Apple components, Friday’s tariff exemption list includes some 400 types of Chinese products. The move to exempt these goods stems from some 1,100 exclusion requests made by a vast number of companies in the United States over the past several months. The list includes a range of computer components used not only by Apple, but by nearly all computer manufacturers, including chips from Intel Corp, Nvidia Corp and Advanced Micro Devices Inc, considered some of the most expensive parts in the machines. All exemptions, however, are temporary, set to expire by this time next year.

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Are oil traders already looking beyond the Saudi oil crisis?

The attack led to Brent crude futures spiking by 20 percent in early Monday morning trading. Despite the severity of the supply outage (some 5.7 million bpd), Saudi Arabian and OPEC sources quickly reaffirmed the markets that crude flows wouldn’t be upended.

As a result, prices fell 6 percent on Tuesday morning, and continued to fall on bearish inventory that same day.

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Riyadh was quick to confirm to some of its Asian trading partners that it would be able to supply all contracted volumes. Thus far, there have been no reports of failed loading/delivery, even though rumors emerged on Thursday morning that the Saudis had requested to buy additional crude oil volumes from Iraq. True or not, Saudi Aramco sources were quick to deny that this wasn’t the case.

The US, China trade war and concerns about the global economy have, for months, fueled bearish sentiment in markets, but this week, albeit briefly, traders’ attention returned to the supply side of the equation. 

The central questions this week are: how quickly can Saudi Arabia restore its production capacity and how severe is this supply outage in reality?

Although they can’t tell the entire story, Brent spreads can shed a light on what the most informed oil buyers currently think. 

At the start of the curve, the 1-month Brent spread is trading at 107-cents backwardated, suggesting that the outage will last at least a few weeks. The 2month/3month spread is trading at 94-cents backwardated, the 3month/4month spread is trading at 67 cents backwardated and the 4month/5month Brent spread is trading at 49 cents backwardated. We have to go all the way out to the 7month/8month spread to find a diff that is trading at less than 40-cents of backwardation. The strong backwardation in the futures price curve here suggests that major oil buyers don’t fully believe the Saudi argument that it will restore full production by the end of September.

Bearish sentiment in August nearly led to a contango situation in the market, and while many analysts still believe that the second half of 2019 will see relative tightness in crude markets, sentiment matters. 

While bullish sentiment lifted the futures price curve on Monday, the tides changed on Wednesday with the price difference between one-month and 7-month Brent contracts narrowing rapidly, suggesting a more bearish outlook.

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While uncertainty remains about how Washington and Riyadh will respond to what they have identified as attacks that came from Iranian soil, with Iranian equipment, there seems to be some kind of consensus that market remains adequately supplied.

For now, the geopolitical risk premium in oil remains intact, and oil continues to trade slightly higher, but unless the Persian Gulf is shocked by another attack like the one on Abqaiq and the Khurais field, prices aren’t likely to skyrocket again in the short-term.

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Trump hits Iranian bank with ‘highest’ sanctions ever imposed on a country

The announcement was made in the Oval Office, where he and Australian Prime Minister Scott Morrison were scheduled to hold a bilateral meeting.

Trump did not immediately elaborate on the sanctions but noted that they were the highest sanctions ever imposed on a country. The sanctions go “right to the top,” he said.

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US Secretary of the Treasury Steven Mnuchin said the latest sanctions action against Tehran was ‘very big’ and that it affected the last source of funds for Iran.

The action comes after Washington accused Iran for the weekend attacks on Saudi oil refineries, a charge Tehran has vehemently denied. Trump said on Wednesday that he has ordered the Treasury Department to “substantially increase” sanctions on the country.

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Russia estimates its oil reserves value at over $1 trillion

According to the ministry’s data, the market value of the oil reserves increased by 88 percent over the past year.
The combined value of hydrocarbons, gold, diamonds, copper, and iron ore has also been re-evaluated and now stands at an estimated 93.4 trillion rubles ($1.5 trillion). The increase in newly discovered oil reserves in volume terms was not so impressive. It rose by 8.7 percent, from 9.04 billion to 9.83 billion tons. Also, the value of oil reserves reached some 71.7 percent of Russia’s GDP in 2018.

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The value of gas reserves increased by about a quarter – from 11.31 trillion rubles ($177 billion) to 14.11 trillion rubles ($221 billion). In volume terms, it increased by 3.6 percent, to 15 trillion cubic meters. The value of Russia’s iron ore was estimated at 1.2 trillion rubles ($18 billion), gold was valued at 614 billion rubles ($9.6 billion), and diamonds were estimated to be worth 546 billion rubles ($8.5 billion). Copper and coal reserves in value terms have slightly decreased since 2017.

Russia’s Ministry of Natural Resources conducted the evaluation of the country’s mineral reserves for the first time last year, estimating their market value for 2017.

For its valuations, the ministry used its own methodology approved by a relevant order. According to the ministry, the subject of the valuation includes “reserves estimated by section of subsoil for which a license for the use of subsoil has been issued.” This means that the assessment does not account for all reserves, but only those which are commercially retractable.

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From a statistical perspective, the valuation of the country’s economic assets allows one to measure “national wealth.” The Russian government ordered the inclusion of natural resources in a balance sheet of its assets and liabilities back in 2012. This measure was required by international standards, in particular those of the Organization for Economic Co-operation and Development (OECD) and the UN’s system of national accounts, or SNA.

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US & Australia to unveil rare earths plan to challenge China’s dominance

The plan will be announced on growing concerns in the US that China could cut off shipments of the vital commodities. The country is the world’s largest processor and producer of the minerals, accounting for more than 80 percent of global processing capacity.

According to a senior administration official cited by Al Jazeera, the plan will be unveiled during a state visit by Morrison to the White House.

“Both countries share an interest in making sure the global supply of rare earths is stable and secure,” the official said, adding that they aim “to make sure there’s a stable and secure global market that’s not easily disrupted by shocks and outside influences.”

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Rare earths or rare metals are a group of 17 chemical elements with special characteristics. The materials are actually not rare, despite their name, but they are difficult to find in the desirable concentrations and they are hard to process, as the ores often contain naturally occurring radioactive materials such as uranium and thorium.

The metals and alloys that contain them are used in many devices that people use every day such as computers, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, and fluorescent lighting.

Australia contains just 2.8 percent of the world’s rare earth reserves but accounts for more than half of the new projects in the global pipeline. Australia’s Lynas, the world’s largest rare earths miner and processor outside of China, is developing a processing plant in Texas. The company’s CEO Amanda Lacaze said last month that they were open to receiving US government funding to build it.

The United States has only one operational rare earths mine, but has no processing facilities.

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The escalating US-China trade conflict has raised concerns about the measures each side could use in their fight, including Beijing’s option to restrict the export of rare earth metals.

The economic measure has been dubbed one of Beijing’s nuclear options in its battle with Washington due to the fact that China is the top producer of rare earth metals and holds the largest reserves.

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