C-suite pillage continues as pension deficits gap wider worldwide

The bankruptcy of Britian’s largest construction company this week shines more light on the plague of underfunding that has compromised pension promises worldwide. Even after the enormous central bank funded rebound in asset prices to record highs today, Carillion has a 587 million pound pension shortfall for its 20,000 employees.  FTSE 350 companies broadly have an estimated 85 billion pounds in unfunded pension commitments. Meanwhile, payouts to executives and shareholders have continued to escalate exponentially.  See Carillion’s demise shines light on UK pension demise:

Carillion’s policy of increasing shareholders’ dividend payouts as its pension deficit widened. In its 2016 annual report, the company said it had increased its dividend in each of the 16 years since it was formed.

Separately, Carillion was criticized Monday by the Institute of Directors, which said there were signs that management relaxed clawback conditions for executive bonuses as the company ran into trouble.

Think about this:  the second longest recovery cycle ever, with 9 years of asset price appreciation to record valuation peaks, has not been enough to catch up pension shortfalls.  Just imagine what these gaps will measure when the next bear market wipes trillions in levered value off financial assets once more.  Think it won’t happen?

Which brings us to the obvious question for trend following retail investors, who left in losses the last two cycles, and are once panic buying assets at record highs once more:

“If everyone know that pensions are screwed, why are they investing in the exact same fashion?” –Jesse Felder, Jan 4, 2018

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BC case reveals 7 scams that have pumped up Canada’s real estate bubble

A B.C. Supreme Court case that pitted two rich families from China against each other provides grim revelations about the kind of migration, tax, and real-estate scams regularly occurring in Metro Vancouver and beyond. “This case provides unusually candid insight into what those who would abuse our immigration and real-estate systems really think in their own words about their true motives for seeking access to Canada and our real estate,” said Vancouver immigration lawyer Sam Hyman.

See:  Explosive BC case details 7 migration scams.  Here is the short list:

1. Not declaring full worldwide income to Canadian tax officials

2. Pretending to spend time in Canada to meet residency requirements

3. Hiding real real-estate ownership

4. Lack of regulation of real-estate agents

5. Illicitly laundering money out of China

6. Misusing provincial migration programs

7. Exploiting Canadian courts, with costly trials

See this link to a video report.


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The Agenda: The true cost of ‘cheap’ food

Supported by a range of subsidies and other government policies, cheap food has been linked to environmental, health and social problems. But incorporating these costs into food prices is an extremely complex issue. The Agenda welcomes Ruth Richardson and Alexander Muller, two thought leaders working toward global policy changes, to discuss how to reconfigure the food system.  Here is a direct video link.

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Get your sleep!!

With record levels of information flooding our brains everyday, cleaning out each night has never been more important.

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Danielle’s bi-weekly market update

Danielle was a guest with Jim Goddard on Talk Digital Network talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.

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Traders ramp oil prices as Aramco underwriting fees dangle ahead

Oil is bouncing again, with the price of a European Brent barrel passing $70 today–more than doubling since 2014, and WTIC above $64 for the first time in more than three years.  Speculators are piling on, spiking volatility and price instability.

The Saudis have said they want oil about $60 a barrel to meet their cash flow targets, but not so high as to encourage more turning on of the taps from other producers.  Too late.  In today’s tech-rich oil sector, higher prices mean more production even without more rigs.  Production advances are racing faster than most dreamed possible.  See:  Why oil is up, but rig count is not:

The number of rigs drilling for oil in the U.S. — from the Gulf of Mexico to the Permian Basin in Texas to the Bakken shale in North Dakota — is less than half the count in the middle of 2014, when the crude market crash began. And yet, America is set to rival Saudi Arabia and Russia, with production expected to top 10 million barrels as early as next month and to reach 11 million toward the end of next year.

How? The combination of faster and faster horizontal drilling and more intense fracking has allowed production to explode even as the number of rigs drop. Up until about four years ago, it was safe enough to use the rig count to track activity because the industry was more reliant on single vertical wells…

At 7,500 feet, the average lateral length of a well is 50 percent longer compared to three years ago. And a rig can drill 25 wells a year, compared to 15 just two years ago.

The race is on.  Incentives to corner markets and ‘trade’ oil higher loom huge as Goldman Sachs and Citigroup are wrangling for lead roles in OPEC’s planned Aramco IPO later this year; the share sale could raise an estimated 1.5 to 2 $trillion–depending on oil prices.  Longer-term prospects for IPO buyers be damned; imagine the upfront underwriting fees to be scooped here.

Beyond the IPO hype though, the truth is that OPEC’s influence on oil prices is waning by the day.  Canadian producers are stuck in this game of chicken too:  higher prices mean more incentives for more supply, alternative fuels, higher efficiency and thus lower prices.  And so it goes.

See this direct video link.

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