Investment Idea....

Buy Bayer Crop Science code: 506285.
Cmp 3780
Add around 3650 
Target double in 2 years.
Long term stoploss 3150.

Kpr Mills though recommended to free flag subscribers in September @ Rs.300 , cmp 625 can be looked at for a quick rise.

The US shale revolution : How the shale revolution changed the world

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Mark Papa, godfather of shale oil. Papa’s former company EOG was a leader in the shale gas industry. When faced with oversupply, the need to switch to finding oil ‘struck me like a lightning bolt’

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summer, Juan Ramos had four jobs; now he has none. A year ago, feeling frustrated and underpaid working in health insurance in Florida, he was stirred by stories of the fabulous money that could be made in the oil boom town of Williston, North Dakota. So he made the 1,800-mile journey north to find a town that lived up to all of his expectations.

A job promised by an acquaintance failed to materialise but it did not matter. He quickly found work doing landscaping, as a nightclub bouncer and with two oil companies, fitting the steel casing used to line wells.

He had no prior experience in oil — his only training was studying videos on YouTube — but that did not bother his employers. He liked the physical work in the oilfield as well as his $24 an hour wages — almost double what he had been making in Florida — and soon he packed in his other jobs and went full-time with one of the oil companies. In four months, he took home $25,000. He was living the dream. “I’d never worked an 18-hour day until I came here. I’d never worked in temperatures of negative 30 degrees,” he says. “I got the opportunity, and I just took it.”

It did not last. In January the company cut his wages to $20 an hour and, soon after that, he was laid off. Kitted out in the roughneck’s uniform of thick beard and dark hoody, he now comes to the state job service office in Williston to polish up his CV. There are still hundreds of jobs in the oil industry on offer here but the number of openings in construction and extraction has fallen by a third since June. A year ago, employers would take almost anyone. Today they can pick and choose.

There are other jobs Ramos could take but he really wants to stay in the oil business. “I’m not going to come out here to work fast food,” he says. “I don’t want to do another job and hate it because it’s not an oil job.”

Innovation of the century

Ramos was brought to Williston by perhaps the most important innovation of the 21st century: the technology for extracting oil from unyielding shale rocks. The Bakken formation, which runs underneath North Dakota and into Montana and southern Canada, is one of the largest oilfields opened up by that revolution. Along with similar oil-producing areas in Texas, it has transformed the outlook for US energy security, created hundreds of thousands of high-paying jobs and rattled the leaders of rival oil-producing countries from Riyadh to Caracas. It has also struck a blow against the idea that world oil production is at or close to its ultimate peak. US oil output peaked in 1970, and until 2009 appeared to be in inexorable long-term decline. Now it has been reborn.

“The US is going to give Saudi Arabia and Russia a run for their money in terms of being the world’s number-one oil producer,” says Daniel Yergin, author of the classic history of oil, The Prize. “And that just wasn’t on the cards five years ago. It’s that recent.”

The industry is still evolving rapidly. Flourishing innovation in the Bakken and the other centres of US oil production has turned them into the energy industry’s equivalent of Silicon Valley: crucibles of creative activity where engineers collaborate and compete to push back the frontiers of technology. Ideas being developed here could one day be deployed anywhere in the world, because countries from Argentina to China have their own shale reserves, and are looking to follow the US lead.

While the new oil industry is still in its infancy, though, it is facing its first real test. American oil producers have become victims of their own success. In the past nine months, the flood of new oil supply they created has caused a collapse in the price of crude, which dropped from more than $100 per barrel last June to less than $50 in January.

The price fall has been like a bucket of cold water in the face for Williston and other oil boom towns, waking them up from the frenzy of the past half-decade to a more sober reality. The US oil industry is battling to adapt and survive in these new harsher conditions. The future of world oil markets and, hence, of the world economy, hangs on its success.

The ‘Apple of oil’

Mark Papa remembers the precise moment he decided the American oil renaissance had to happen. Avuncular and mildly spoken, he is the antithesis of the stereotypical two-fisted Texas oilman. But the company he led until the end of 2013, EOG Resources, has been one of the great success stories of the boom, dubbed “the Apple of oil” by the analyst Paul Sankey because of its ability to translate innovation into a profitable business.

Technology that built a revolution

Horizontal drilling 

Traditional oil wells go straight down, but since the 1980s many more commercial wells have gone first down, then round a corner, then out horizontally for another mile or more. Their advantage is that they expose a much greater area in a layer of oil-bearing rock.

Multi-stage hydraulic fracturing 

Hydraulic fracturing, or fracking, uses water, sand and chemicals pumped into a well to open small cracks that will release the oil or gas. It has been used since the 1940s. Refinements to the technology have opened up previously unyielding shales for first gas, then oil.

Walking rigs 

The most modern rigs are able to “walk” from hole to hole on stubby legs, making them more flexible and cheaper to move.

Proppants 

Sand is used in fracking fluids to “prop” open cracks created in the rock so the oil and gas can flow out. Companies are experimenting with various proppants, such as ceramics, which can give better results.

Data analytics 

Every well is different, and drilling generates a wealth of data about pressures, types of rock, the way it was fracked, the proppant used. After six years of production, data can be analysed to see which methods and conditions have generated the best results. Deploying that IT effectively is key to the future of the shale revolution.

EOG came from the most unpromising of beginnings. Its original name was Enron Oil & Gas Company and, until 1999, it was majority owned by Enron, the fraudulent energy group that collapsed in 2001. Having secured EOG’s independence just in time, though, Papa led it to a strong position in the fast-growing shale gas industry.

Innovations driven by an industry veteran called George Mitchell had made it possible for the first time to produce gas at commercially viable rates from formations such as the Barnett Shale of north Texas. EOG was an early adopter of the technology, discovering abundant reserves of shale gas that would provide fuel for power generation and heating, and raw materials for the petrochemicals industry. Unfortunately, many other companies were doing the same.

“The amounts of shale gas that were being uncovered [in 2002-06] were just astonishing,” says Papa, now a partner at the private equity firm Riverstone Holdings. “It was very obvious that there had been just a huge breakthrough in technology, and the amounts of commercial gas available in North America were absolutely mind-boggling.”

Papa’s revelation came in January 2007, when he was presenting at a Goldman Sachs conference alongside a couple of EOG’s rivals, listening to them talking about their vast discoveries and their prospects for rapid growth.

“It struck me like a lightning bolt,” he says. “There were so many companies finding so much gas . . . And I thought: ‘You know, the gas price in North America is about to be ruined for the next 30 to 40 years.’ And I sat there on this panel, looking at the two CEOs on my left and my right, and I thought: ‘I wonder if they realise what has just hit me.’”

In October of that year, at the annual meeting of EOG’s divisional managers in Scottsdale, Arizona, he spelt out the implications of his insight.

“I hate to tell you this, guys,” he remembers telling them. “You have to go back to your divisions and tell your geologists to stop finding gas — stop finding the component they’ve been looking for for the past 40 years of their careers — and immediately switch to finding shale oil.”

The science of shale

When you look at a piece of heavy, tightly packed shale, it seems inconceivable that oil could ever flow out of it. It would be like squeezing blood from a stone. For decades, conventional wisdom in the industry agreed. Shales were known as “source rock”: the places where oil and gas was formed as organic matter was “cooked” over tens or hundreds of millions of years. But geologists generally believed that the resources could be extracted only if they had migrated to “reservoir rock”, typically sandstones, where there were interconnected pore spaces through which the oil and gas could flow. If you drill a well into reservoir rock, the pressure underground can send the oil and gas flowing up to the surface, in a gusher if you are lucky. Traditionally, if you drilled a well into shale, you were wasting your time.

Advances in two technologies in the late 1990s and early 2000s changed all that, although at first only for gas. Hydraulic fracturing — injecting a mixture of water, sand and chemicals underground at high pressure — cracks the rock to release the gas. Horizontal drilling — sinking a well a mile or more straight down, then a mile or more sideways — made it possible to expose a much greater area of resource-bearing rock. Neither practice was entirely new but refining the techniques and combining them transformed the commercial viability of shale gas.

Yet even after shale gas production had become an established fact, Papa says, the “industry dogma” was that the same could never be true for oil.

Conventional wisdom held that while small gas molecules might be able to slip through the tiny pore spaces in shale rocks, much larger oil molecules could not. “If you had taken a poll in 2005 of 1,000 industry executives, 999 of them would have said you cannot flow oil commercially through shales, because the hydrocarbon size of oil is too large,” he says.

Rather than taking the conventional wisdom on trust, Papa was determined to find out for himself. EOG studied shales using CAT scanners, and concluded that although the pore spaces were small, they were still big enough for oil to flow through them. Even so, when Papa announced his planned pivot to oil, many of EOG’s managers were sceptical.

“You could have heard a pin drop in that room,” he says. “Some of them probably were thinking, ‘Poor Mark, he’s lost his mind.’”

Regardless of their reservations, though, “like good soldiers”, EOG’s geologists dutifully set about looking for oil. What they found was the Eagle Ford shale of south Texas, running from around Austin south and west into Mexico. It was a formation that was known to hold a lot of oil but the rest of the industry had ignored it because other companies could see no viable way to get the crude out. EOG spent a year quietly signing oil leases with landowners, and drilled its first well there early in 2009, using the same techniques of horizontal drilling and hydraulic fracturing that had proved so effective for gas. The results were a spectacular success. By April of the following year, EOG was able to tell investors that it had found reserves of about 900 million barrels of oil.

 . . . 

While EOG was preparing to drill its first oil well in the Eagle Ford shale, another company called Brigham Exploration was transforming the outlook for the Bakken, 1,300 miles to the north. Hundreds of oil wells had been drilled in North Dakota since 1951, mostly going straight down through the shale to reach the more co-operative reservoir rock below. The state had a mini-oil boom in the late 1970s, achieved by tapping the conventional reservoir rock, but that petered out in the 1980s.

Since 1987, companies had been drilling horizontal wells to tap the Bakken formation but with only limited success. The rock is not a pure shale: most of the oil is contained in a layer of dolomite sandwiched between two layers of shale, making it somewhat easier to tap than the Eagle Ford, but the wells had always been respectable rather than spectacular producers.

EOG had drilled a successful horizontal well in the Bakken in 2006, near the town of Parshall, east of Williston. But that still seemed to indicate potential for only a small portion of the formation, and Mark Papa was cautious about committing too much investment there.

“We made a tactical mistake in retrospect,” he says now. “We weren’t sure what we had . . . We could have owned the Bakken play, literally, at that time.” Instead of tying up drilling rights to all the acreage in the Bakken, EOG signed up about a fifth of it, leaving plenty of room for its competitors.

Late in 2008, Brigham experimented with a Bakken well called Brad Olson 10-15 #1H. The plan was to drill a long horizontal well, running sideways for about 10,000 feet, and frack it in 20 stages, allowing the force to be applied more precisely.

“At the time there were a lot of people saying, ‘You can’t do that,’” says Russell Rankin, who worked for Brigham then. “There were a lot of firsts. It had never been done, so there’s a lot of naysayers that say you can’t do it.”

The naysayers were wrong. Other wells in the area produced about 240 barrels per day when they started up. The Olson well had initial production of more than 1,400 b/d. Brigham’s later wells did even better. “We not only proved that the technology could be done but we also did it in an area where they didn’t think the rock was good enough,” Rankin says.

EOG’s Parshall well could have been an anomaly. Brigham’s Olson well showed there were large areas of the Bakken that could be made to produce oil at commercially attractive rates. “The economic acreage dramatically expanded with that one well,” Rankin says. “When this well was drilled and completed, people’s minds started opening up.”

Innovations are hard to protect in the oil business, and Brigham’s success was quickly emulated. Companies with drilling rights in the Bakken, including Continental Resources, Hess and Whiting Petroleum as well as EOG, began to pour money into the area, drilling their own horizontal wells with multi-stage fracks. The number of drilling rigs in North Dakota doubled from May to December 2009, from 35 to 75, and then doubled again to 173 by the end of 2010. The sleepy rural town of Williston, residents say, “went crazy”.

Boomtown, USA

Oil companies and the businesses that support them were desperate for workers, and people flocked to North Dakota from all over the country to meet that need. “It was insane,” says Cindy Sanford, manager of the Williston job service. The town grew from 14,787 residents at the 2010 census to an estimated “service population” of about 32,000.

Thousands were put up in “man camps”: clusters of prefabricated huts where workers would sleep and eat while working 12-hour days for two solid weeks, returning to their homes across the country for two-week breaks.

Others turned up on spec without a job or anywhere to live. An NBC Nightly News segment in October 2011, describing Williston as “where the jobs are”, at a time when the US recovery was slow and the national unemployment rate was 8.8 per cent, drew a flood of hopeful newcomers.

“People would walk in here and say, ‘I just came in from Florida,’” Sanford says. “They were sleeping in their cars because there was no housing.”

Shale oil has transformed US energy security and rattled leaders of rival oil countries from Riyadh to Caracas

The roads were jammed with trucks and Ford pickups. You might have to wait in line for 90 minutes to get your hair cut at Walmart, or for two hours to get a table at one of the town’s handful of restaurants. Rents for single-bedroom homes were the highest in the country, according to a survey for Apartment Guide last year, at $2,394 per month; more than in the metropolitan areas of New York or San Francisco.

Businesses catering to the predominantly male oilfield workforce, including bars, strip clubs and tattoo parlours, did roaring trade. Boomtown Babes, a bright pink hut in a hotel car park, opened with women in vests selling “the Bakken’s breast coffee”, charging more than $7 for a large double-shot latte.

The crime rate, which had been well below the US average, rose sharply. There were 1,328 felony arrests in Williston last year, more than twice as many as in 2013.

Williston’s infrastructure scrambled to keep up. There are new and half-built homes all around the city and plans for a $500m mall development, expansion of the water treatment system and a new airport.

“We’re playing SimCity in real life,” says Jeff Zarling of Dawa Solutions, a local web design and marketing firm. “We had to build everything.”

The sign as you come into Williston still says “Boomtown, USA” but the town is not really booming any longer. The streets are quieter now and the wait for a haircut is shorter. A couple of the man camps on the outskirts of town are closing.

The number of rigs drilling for oil in the Williston Basin has slumped from 190 at the end of November to just 89 at the beginning of April. With each rig supporting about 120 jobs, that is about 12,000 jobs gone from the region in the past five months. Reported unemployment in the county is still only 1.9 per cent — low by any standard — but the days of just turning up and having a choice of jobs are gone.

“We used to say if you walk in through the door, there’s four jobs for you,” says Cindy Sanford. “Now there’s maybe a job and a half.”

The neon adverts around Williston for petrol at $2.49 per gallon, about a third less than it cost last summer, are constant reminders of the reason for that. The Bakken and other centres of the US oil boom have suffered the same fate that Mark Papa foresaw for the gas industry: they have been too successful for their own good.

The oil price collapse

Between 2010 and 2015, US oil production grew in a way that has few parallels in the history of the industry. In 2009 it averaged 5.4 million barrels of crude per day. Last month, it was 9.4 million, approaching the all-time high of a little over 10 million reached in 1970.

Rents for single-bedroom homes in Williston last year were the highest in the country, at $2,394 per month — more than in New York or San Francisco

Mark Papa had believed that oil was less at risk of becoming oversupplied because, unlike gas, it is sold in an integrated global market. The US does not export much crude oil but it exports a lot of refined products such as diesel fuel, and rising crude production has displaced imports from Africa and the Middle East. From 2011 to the summer of 2014, the steady flow of additional oil from the US was offset in world markets by disruptions to supplies from other countries, including Libya’s civil war and the sanctions imposed on Iran because of its nuclear programme. Even as US output soared, world oil prices remained remarkably steady at about $100-$110 per barrel.

Last summer, though, the balance in the market began to shift. US production was roaring ahead even faster than expected, as oil companies discovered new techniques to boost their output. At the same time, global demand growth was faltering, partly because of the slowdown in China.

The conditions were right for a conflagration in oil markets. When Saudi Arabia signalled that it would not cut its production to support prices, it lit a match. The kingdom, which is the most influential member of Opec, the producing countries’ cartel, had been hinting since October that it would not support production cuts. Right up until the Opec meeting in Vienna on November 27, though, there were many who still hoped the Saudis would spring a surprise and back a cut after all. When that did not happen, the price of oil collapsed. Much of US shale production, which typically has higher costs than oil in the Middle East, became unprofitable.

Production from shale wells declines very quickly, so companies need to keep drilling just to keep their output level. The plunging numbers of active rigs have already been reflected in small falls in oil production in the Bakken and the Eagle Ford shale. If the rig counts stay at these levels or fall further, it is likely that US production will drop, too.

Harold Hamm, the son of an Oklahoma sharecropper who is now the billionaire majority owner of Continental Resources, one of the pioneers of the Bakken, says Saudi Arabia has been engaged in “predatory pricing”, aimed at the US industry.

“They realised that this was a big threat. The development of these shales is a threat to their market share,” he says. “So they are using predatory pricing to try to drag us down, to take the price down and kill this industry. And they’re doing a pretty good job of it. In 120 days they’ve laid down over half the rigs drilling for oil in this country.”

 . . . 

Like many in Williston, Rich Vestal takes a close interest in Opec. But he thinks its power is waning. “The American dream is to be self-sufficient,” he says, and in oil he thinks that point is getting closer, regardless of the latest downturn in the US industry. He came to Williston in the last oil boom, in the late 1970s, working for a company that went bust because it had overextended. With the customers and staff he had built up, and a $15,000 loan that he told the bank was for home improvements, he started his own company, Red River Oilfield Services, which has now been in business for 37 years. A large part of its business is in supplying chemicals for the “mud” used in drilling wells, so its fortunes are directly tied to the number of rigs in the area.

Oil companies are under pressure to cut their costs and strengthen profitability, and that gets passed on to their suppliers. Some have told Red River they want 40 per cent cuts in rates.

“It is tough,” says Curtis Shuck, Red River’s vice-president of business development. “Suppliers are out of flesh to cut and they are getting down to the bone. It’s pretty damn painful.” A year ago the company had about 120 employees; today it is down to 80.

Financially weaker countries that rely on oil revenues, and have no cushion against price swings, face government dysfunction or even ‘state failure’

But Vestal remembers times that have been just as bad in the past. In 1985, the North Dakota rig count fell from 225 to just two. “We went for 32 days without filling a single delivery,” he says. “It was really ugly.” The industry has been up and down and up before, and he expects it will be up again in time.

Petroleum Services is another Williston oil industry supplier that has been shedding jobs, laying off about 30 people from its workforce of 137 last year. If conditions do not improve, says Mihir Varia, its business analyst, it will have to lose 30 more. It is under huge pressure to cut the rates it charges customers. But Varia says there are limits on how far its rates can go. “If we need another 20 per cent off the selling price, we can’t survive.”

Petroleum Services and companies like it, however, offer part of the solution to the industry’s crisis. Costs tend to be higher in the Bakken than in the US oil boom areas in Texas, in part because North Dakota has not developed an ecosystem of suppliers to support a large-scale industry. When something breaks, the replacement part has often had to be trucked in from Houston or Calgary, at great cost in time and money. Building up a stronger network of local suppliers will be one way to keep costs down.

In rolling grassland about an hour from Williston, the peace is broken by the roar of machinery. Packed into a gravel area a few hundred yards across are 12 large trucks with high-pressure pumps, a row of water tanks, and trailers carrying sand, to frack a group of wells for Statoil, the Norwegian oil company. Statoil bought Brigham Exploration for $4.4bn in 2011, and has since been the most successful foreign operator in US shale.

The workers, masked against the flurries of sand that get whipped up into the air, keep the frack job ticking like a well-regulated machine. There are eight wells on one site, spreading out below the surface, and four are being completed simultaneously. The pumps are connected to a well, and about 200,000 gallons of water are pumped in to frack a single section. Then a plug is put in to seal that well temporarily while a stage is fracked on the next one, and so on, in rotation.

Drilling and completing wells this way can be a much cheaper and more efficient way to operate than making each of them a one-off. Russell Rankin, now a manager of geology at Statoil, says that in 2013-14, a well took them 22 or 23 days to drill and complete. Now it takes just 10 or 11.

In the early days of the shale boom, it was the smaller companies such as EOG and Brigham that innovated. Now, Rankin says, Statoil and other larger companies need to be equally nimble and creative, to drill more wells with each rig, and recover more oil from each well. “You keep pushing that envelope,” Rankin says. “There’s a lot of efficiencies left to gain there.”

New technologies are coming into use all the time: new fracking fluids, better drills, more sensors to deliver data on what is happening down the well, and more computer power to analyse that data to inform decisions about how the next well should be drilled. There are also more straightforward savings to be achieved simply by managing operations better.

During the boom, the industry was “out of control”, says Curtis Shuck of Red River. “When things were going crazy, nobody had time to think about it. You couldn’t help but make money,” he says. “Now we’re doing it right.” There is no “one single silver bullet that’s going to cure the woes of the entire industry,” he adds. “But by everybody digging deep and pulling together, all of a sudden the economics start to make sense.”

There is a consensus in Williston that if oil were to rebound to $70 per barrel for benchmark US crude, compared to $56 last week, the industry would pick up. In effect, that would put a ceiling on oil prices, because as soon as oil becomes expensive enough, there will be more drilling and more supply coming on the market. Harold Hamm of Continental Resources expects oil to recover but thinks the rebound will be limited. “We’ll maybe get $75 or $80,” he says. “But we won’t get the $120-$130 that the Saudis want.”

Global instability

The US oil boom has had profound implications for the rest of the world, boosting economic growth and enhancing America’s global influence. The Prize’s Daniel Yergin, who is vice-chairman of IHS, the research firm, argues it was critical in putting pressure on Iran to negotiate a deal over its nuclear programme. International sanctions that cut Iran’s oil exports were effective because oil markets were reassured that rising US production would provide an alternative source of supply. Without the shale boom, Yergin says, “There would not be a preliminary agreement with Iran, because Iran would not have had to come to the table.”

The boom has helped put pressure on other geopolitical rivals of the US. In Russia, the collapse in the price of oil, its principal export, has added to the problems facing President Vladimir Putin, already squeezed by western sanctions over the undeclared invasion of eastern Ukraine. Low oil prices are an indiscriminate weapon, though: they also hurt US allies including Saudi Arabia, Nigeria and Iraq, which has been warning that the strain on its finances is hampering its fight against the Islamic State.

If the international oil price does hit a new ceiling at about $80 per barrel, the countries that need a higher price to balance their budgets will come under growing financial strain.

A weaker oil price is on balance good news for the world economy, adding an expected 0.5 to 1 per cent to global growth this year, according to World Bank estimates. The effect on some of the losers from cheaper oil, however, could be catastrophic. “The shale revolution is the most politically disruptive factor in the global oil market since the formation of Opec in 1960,” says Edward Morse, head of commodity research at Citigroup. Financially weaker countries that rely on their oil revenues, that have not built up large reserves to cushion against price swings, and that cannot readily diversify into other industries, face the threat of government dysfunction or even “state failure”, Morse says. “This is a recipe for global instability.”

Past periods of low or falling oil prices have contributed to political upheavals including the Iranian revolution of 1979, the Soviet Union’s collapse in the late 1980s-early 1990s, and the 1998 election that gave Hugo Chávez the presidency of Venezuela. Consumers enjoying lower fuel prices resulting from the US shale boom should watch out for the turbulence following in its wake.

Oil producers praying for relief from low prices might take heart from the lost jobs and idled rigs in the US. But the American strengths that made the boom — entrepreneurial culture, depth of knowledge in oil and gas, innovation and supportive capital markets — are now being deployed to keep it alive. Recent history suggests it would be rash to bet against them.

“Look how far we’ve come since 2006,” says Russell Rankin of Statoil. “It’s incredible. So for us to think that we’re through with the technology . . . to say that that’s over is kind of idiotic . . . We’ll always come up with a solution.”

Commodity Trade Idea

BUY NCDEX SUGAR JULY CONTRACT (prices given in Rs)
CM.2602.

Add at 2570-2550
Target 2700-2750-2780
Stoploss-2500

BUY ICEUS SUGAR JULY CONTRACT (prices given in $)
CMP $13.19

Add at 13-12.90
Target 14+ 
Stoploss 12.7

How Congress Retains Power Despite Being Out of Power

Congress model of development and governance is simple.

When in power, distribute freebies, increase MSP beyond all calculations of market, waive off loans, win second term. Enjoy all the pelf and power during all these years. Use power to oblige persons all around.

During the years in power, create sine curves for the faithfuls, create alternative power centers—unelected, unaccountable—the Commissions, the Tribunals. Pack them all with The Dynasty loyalists. With media houses, put quid pro quos in place, have relatives of its own politicians put in positions of power in media. Create a bureaucratic top brass, through postings to lucrative posts, loyal to The Dynasty. In short, create a permanent Deep State in Delhi sympathetic and loyal to The Dynasty.

Inflation gets out of control, jobs disappear, unemployment soars, balance of payment goes out of hand, credit rating of the country is revised downward, but media and academia makes sure that The Dynasty never gets the flak.

As the economy tanks by the end of the second term, election is lost.

Along comes a Morarjee/Rao/Vajpayee/Modi who takes all the unpopular, painful decisions, puts the economy back together again. Of course sometimes some Bhinderawale intrudes and decides to put to use all the unemployed youth. Make it look like an assault on the country and use even that to win an election.

Even after losing the election, continue enjoying all the power and pelf thanks to the loyalists in bureaucracy, academia and media. Commissions and Tribunals continue to harass and paralyse the duly elected government. Effectively making sure that Congress may be out of office, but it is never out of power.

Use media to continuously malign the government, to create huge negative image. Create the impression that the government is skinning the poor and the peasants to feed the rich. Using loyalists in bureaucracy run whisper campaigns, and engineer “leaks” and vicious rumors about the working of the government.

So even as the economy is pulled back from the brink, the man doing all the pulling back, doing heavy lifting, is made out a villain, and duly loses the elections.

With Congress duly back in office, repeat the whole cycle, starting with freebies again.

This has many dangerous flaws though.

Congress has lost many states permanently to the regional leaders who could beat it in populism, freebies, and profligacy. Those states themselves have been effectively run into ground, as some prudent leader doesn’t get to alternate between the populist leaders’ terms.

Some Bhinderawale someday may get through the barricades around Delhi.

And the over all curve of economy is always going down and down. So even as the economy is pulled back from the brink by likes of Modi, it doesn’t come back to the point where from it started sliding down. It will someday reach the point of implosion and collapse.

And of course this also tells us about the national character in India. After all, the model can not succeed without willing accomplices in the bureaucracy, the academia, and the media who man the Deep State. Evidently they sell their conscience and their country for the power the positions in the apparatus of Deep State bring.

What a country becomes depends solely on the character of its ruling elite.

Vapor Capital Asset Mismanagement LP: Jon Corzine Planning Hedge Fund Launch

Shortly after Jon Corzine not only destroyed MF Global but "vaporized" $1.6 billion in supposedly segregated client funds which were illegally commingled with operating cash, Jon Corzine had a brief encounter with the legal system including several kangaroo court sessions in Congress, which ultimately led to absolutely nothing for two simple reasons.

Reason #1:

 

And Reason #2:

 

In fact, Jon Corzine's quiet disappearance into the shadows was apparently only punctuated by one new notable entry in the Urban Dictionary for the term "Corzined"

 

... but not before rumors emerged that Corzine, whose dream has always been to run his own capital, would start a hedge fund. In August 2012 we wrote that "after 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case." And algos... And glitches... And faulty software installs... And some junior person who has long since left the company...  and, and, and, lots and lots of passive voice... Because in the Banana republic of the crave, no bundles can ever go to jail, no matter how heinous the crime, which is not to say other places are better: in Thailand you shoot your secretary in the stomach during dinner with an Uzi and you don't even pay a $600 fine. But at least it puts things in perspective. So what is next in store for this former man of power? "Mr. Corzine, in a bid to rebuild his image and engage his passion for trading, is weighing whether to start a hedge fund, according to people with knowledge of his plans. He is currently trading with his family’s wealth. If he is successful as a hedge fund manager, it would be the latest career comeback for a man who was ousted from both the top seat at Goldman Sachs and the New Jersey governor’s mansion." So will Jon will be buying Italian bonds? We don't know. Ask him yourself."

 

However, this led absolutely nowhere, leading many to speculate that Corzine was just waiting for a correction before reentering the asset mismanagement business.

Well, nearly three years later of manipulated, artificially propped up markets floating on $22 trillion in central bank assets, Jon Corzine has had enough of waiting for a correction which almost came (and then Bullard brought up QE4) but not really. So, as the WSJ reports, the time has come for another push for Vapor Capital Asset Mismanagement LP. To wit:

on S. Corzine, the embattled former MF Global Holdings Ltd. chief executive and ex-chairman of Goldman Sachs Group Inc., has discussed plans to start his own hedge fund in recent months, according to people familiar with the matter.

 

The fund would start with cash from Mr. Corzine’s personal wealth and a handful of outside investors.

One can almost guess which Clinton foundation would be among the seed invators.

Mr. Corzine said he had been speaking with about a half-dozen potential investors, and projected around $150 million in assets under management, one of the people said.

Will the fund invest all of its AUM in 2 year Italian bonds? All answer will surely be revealed in time, but first Corzine has to get over that whole "criminal" stigma:

Mr. Corzine most likely wouldn’t be able to launch a fund until legal proceedings against him over MF Global have been resolved. Pretrial motions are expected to go at least until February of next year. The Commodity Futures Trading Commission in June 2013 filed civil charges against him and is still collecting evidence for a possible trial.

However:

Mr. Corzine’s supporters point out that he hasn’t been criminally charged and that after MF Global collapsed, his bets on the bonds of Portugal, Italy and other European nations were ultimately proven on target.Mr. Corzine’s supporters point out that he hasn’t been criminally charged and that after MF Global collapsed, his bets on the bonds of Portugal, Italy and other European nations were ultimately proven on target.

Yes, Corzine's supporters are spot on: the ECB joined the Fed and soon the PBOC in bailing out every single clueless investor and E-trade baby in the world, however for Corzine his particular bail out came a few months too late. As for why Corzine was never criminall charged, see the first two images above.

For now Corzine is keeping a low profile:

“Jon Corzine is not managing anybody’s money and has not asked a single investor to put money into a fund,” said Andrew Levander, a lawyer for Mr. Corzine. “He is gratified that others might want to invest with him.”

Furthermore, unlike 3 years ago, any attempts to reach Jon Corzine through his BBG header will meet with failure: not even Corzine'sphone is listed.

 

However, those who truly seek the former Goldman chief, NJ governor, and MF Global "vaporizer" will surely find:

Mr. Corzine, who styles himself a so-called macro trader in the tradition of Paul Tudor Jones or George Soros, has maintained some Wall Street ties. In office space borrowed from a friend in midtown Manhattan’s Time-Life Building, Mr. Corzine has been trading his own money, people familiar with the matter said. At present, Mr. Corzine employs one assistant, one of the people added.

But before the long line of eager investors stretches around the corner, a quick reminder: this is a man who literally "vaporized" clients funds. Even the CFTC, run until recently by a fellow former Goldmanite (and soon, America's next Treasury Secretary), was unable to get Corzine entirely off the hook:

The CFTC alleges that Mr. Corzine oversaw the misuse of customer funds and said he bore responsibility for the brokerage’s rapid descent. The agency also charged him with “failure to supervise diligently,” a violation of CFTC rules that mandate top officials at regulated firms maintain strong oversight of operations and employees.

 

The agency is hoping to levy a monetary penalty on Mr. Corzine and bar him from trading commodities again, something that might hamper his ability to run a fund.

Which is a problem, because in a world in which few trade individual stocks and the central banks merely transact in futures such as ES or GC, this would mean that Corzine is unable to trade what few liquid instruments remain in the so-called market.

Unless, of course, he decides to hire Burno Iksli formerly of the JPM London Whale, and corners the penny stock market, hoping that unlike the Italian bond fiasco, at least once central bank will come to his rescue just in time, before the next career ending margin calls arrives.

DYNASTIES

The power of families

The enduring power of families in business and politics should trouble believers in meritocracy

“AS A democracy the United States ought presumably to be able to dispense with dynastic families,” wrote Arthur Schlesinger junior, one of America’s best-known historians, in 1947. Yet almost 70 years on, next year’s presidential election could well become a family affair. A Clinton or a Bush has been on the ticket in seven of the past nine races. Hillary v Jeb may offend against equal opportunity, but not the laws of statistics.

How, people wonder, can this happen in a country that went to war to rid itself of a king’s hereditary authority? That is the wrong question. Around the world, in politics and business, power is still concentrated in the family. Power families and dynasties are here to stay. The question is how to ensure that they are a force for good.

Double helix, double standards

In politics the Clintons and the Bushes hardly count as exceptions. The leaders of Japan, South Korea, the Philippines and Bangladesh are all related to former political chiefs. The “Stans” of Central Asia are family fiefs. The Gandhis are struggling in India, as are the Bhuttos in Pakistan, but the Kenyattas are kings in Kenya, a Fujimori is once again leading the polls in Peru and a Trudeau has a fighting chance in Canada. Meanwhile the lengthy catalogue of China’s “princelings”, the children of Communist Party grandees, starts right at the top with the president, Xi Jinping.

In Europe family power is one reason why politics seems like a closed shop. Fifty-seven of the 650 members of the recently dissolved British Parliament are related to current or former MPs. François Hollande, France’s president, has four children with Ségolène Royal, who ran for the presidency in 2007. Three generations of Le Pens are squabbling over their insurgent party, the Front National (see article). Belgium’s prime minister is the son of a former foreign minister and European commissioner. The names Papandreou and Karamanlis still count for something in Greece.

In business, too, family companies continue to thrive, as our special report in this issue explains. More than 90% of the world’s businesses are family-managed or -controlled, including some of the biggest, such as News Corp and Volkswagen, a carmaker in the throes of a boardroom battle between its two main family owners. The Boston Consulting Group calculates that families own or control 33% of American companies and 40% of French and German ones with revenues of more than $1 billion a year. In the emerging world the preponderance of family control is greater still.

The importance of power families would have surprised the founders of modern economic and political theory. Political dynasties were supposed to fade as ordinary people got the vote. Family businesses were supposed to lose ground as public companies raised money from millions of small investors.

This never happened—partly because many advantages of kinship proved surprisingly enduring. Political dynasties have a powerful mixture of brand names and personal connections. Family companies can be more flexible and far-seeing than public companies. Family owners typically want their firms to last for generations, and they can make long-term investments without worrying about shareholders hunting for immediate profits.

Power families have also prospered from big, and welcome, social and economic shifts. Their prominence reflects the increasing prosperity of Asia, where families traditionally play a large role. The emancipation of women is doubling the talent pool. In an earlier age political chauvinism would have excluded Park Geun-hye, Keiko Fujimori—and Mrs Clinton. Likewise women have successfully taken the reins at Spain’s Santander bank, Australia’s Hancock Prospecting, and even Saudi Arabia’s Olayan Financing Company.

However, family power poses problems. Liberals, such as this newspaper, believe in the importance of protecting private property and allowing entrepreneurs to enjoy the fruits of their talents. But at the same time they believe that people should be judged on their individual merits rather than their family connections or their brand name. The New York Times reckons that the son of a governor is 6,000 times more likely than the average American male baby-boomer to become a governor himself, and the son of a senator is 8,500 times more likely to become a senator. The concentration of power and wealth in a small elite raises questions about legitimacy.

Family power also has its dark side—especially where business and politics are entwined in an exclusive nexus of money and influence (see article). The Clintons are a worrying example: all sorts of people, including foreign governments, have given millions to the Clinton family foundation, perhaps in part because they think it will give them influence over a future president. Lazy incumbents have an incentive to use political connections to protect themselves from competition. This can lead to corruption. A study found that in 2003 firms representing almost 8% of the world’s market capitalisation were run by relatives of their countries’ political leaders. Even without political connections, business families can exercise an unhealthy influence over the wider economy. Pyramid ownership structures enable a small chunk of capital to exert a large degree of control. Another study found that the richest ten families controlled 34% of market capitalisation in Portugal and 29% in both France and Switzerland.

Family values, public goods

The secret to healthy family power is competition. In an open system of free markets, governed by the rule of law and held to account by a free press, nepotism matters less. America’s vastly expensive elections favour political machines: another reason to re-examine campaign finance. Pyramid structures lock up capital markets. America limited them in the 1930s. Britain followed suit in the late 1960s and Israel is doing the same. So should other countries. Inheritance taxes in places such as Britain favour the family company: it should survive on its merits. Family power, like any other sort, needs watching over. If it cannot be contested, it should not be welcome

The World of Bubbles

ECB's Draghi: "Haven't seen any evidence of any bubbles"

Fed's Bullard: "Most of the risk from bubbles lies ahead of us"

China's Li: "Will guard against bubbles"

 

Do NOT Look At These Charts...

 

 

 

 

 

 

 

 

 

 Source: Investir.ch