How U.S.A Spend Their Time Online

We have good news for budding entrepreneurs considering launching yet another online method of stalking the object of their affection: exhibitionism and sharing photos of your dinner, pardon social networking, remains as popular as ever on the internet.

According to an online survey by GfK and the Interactive Advertising Bureau, people said they spent about an average of 37 minutes a day on social networks like Facebook and Twitter in 2013. That internet staple, emailing, clocked in at a 29 minutes, while watching online video was 23 minutes.

However, in a troubling trend for the YouTubes of the world, the WSJ notes that while people doubled the amount of time they spent watching online video over the past four years, the overall percentage of their online time spent watching video slipped to 12% in 2013 from 13% the year before.

But the worst news is for that biggest loser of all in the New Online Normal: legacy media, whose paper publications are an endangered anachronism in a day and age when everyone reads (if only the headlines) on their mobile device, is also getting hammered when it comes to its online incarnation, with the average American spending just 5 minutes reading online newspapers, less than even blogs.

Of course, when the day comes that the final investigative reporter and journalist loses their job, suddenly the question will arise what will all those 20-some year old "journalism" majors whose only skill is to copy and paste, do?

For now nobody cares to even contemplate this issue: they are too busy updating their Facebook profiles.

Billions of barrels-worth of shale oil found in southern England

About 4.4 billion barrels-worth of shale oil have been found in the ground beneath the south of England, according to a report published Friday by the British Geological Survey (BGS).

The study, commissioned by the Department for Energy and Climate Change and released this morning, says the huge oil reserves lie under the Weald Basin in Kent and parts of Sussex and Surrey.

How much of this is recoverable is not yet known — further drilling and testing of new wells will be needed to establish this, but the discovery is set to spark a new stage in the battle between environmentalists and energy firms over the controversial topic of fracking.

The discovery has already pushed British authorities to start mulling plans to ease rules on accessing shale oil and gas, including drilling without landowners' permission

The discovery has already pushed British authorities to start mulling plans to ease rules on accessing shale oil and gas, including drilling without landowners' permission, reports Reuters.

Under the new plans, energy firms will be allowed to dig 300 metres (1,000ft) down for shale gas and deep geothermal operations provided they notify local communities and give them a “voluntary community payment” for access to the land of US$34,000 per well.

Last year, the BGS published a study of the Bowland Shale in northern England, which, it said, contained about 1,300tn cubic feet of gas. Analyst say that even if only a tenth of that were extracted, it would be the equivalent of 40 years’ gas supply for the UK.

Aluminum Reaches Three-Week High on Shortage Speculation

Aluminum reached a three-week high in London on speculation supply of the lightweight metal will run short of demand. Copper headed for a third weekly climb as available supplies shrank further.

The aluminum market will be in deficit this year by 1.3 million metric tons, leading global producer United Co. Rusal said today. China’s imports of bauxite, used to make the metal, dropped 14 percent in April, customs data showed this week. There were no shipments from Indonesia, China’s main supplier in 2013, which banned raw-ore exports in January of this year.

“Concerns of the Indonesian ore ban impacting bauxite availability have been voiced recently,” Vicky Sanders, head of analytics sales at Marex Spectron Group, said in a note. “We would caution that tightness isn’t expected to have a material effect until mid-2015/2016.”

Aluminum for delivery in three months added 1.3 percent to $1,819 a ton by 12:43 p.m. on the London Metal Exchange after touching $1,824, the highest since April 29.

Copper was set for the longest weekly winning streak since February after inventories available for removal from LME warehouses fell below 100,000 tons for the first time since 2008. Stockpiles total 175,850 tons, of which 92,650 tons is available for delivery, according to daily data. The remainder is earmarked for removal.

The metal for delivery in three months gained 0.6 percent to $6,915 a ton on the LME, leaving prices up 0.8 percent this week. Copper for immediate delivery traded at an $80-a-ton premium to the three-month contract, indicating limited supply. The metal for delivery in July on the Comex inNew York rose 0.7 percent to $3.164 a pound.

“Copper remains supported above $6,850 by lower stockpiles and higher premiums for immediate deliveries,” RBC Capital Markets LLC said in a note.

Disrupted output at LS-Nikko Copper Inc. also aided copper, said Chae Un Soo, a metals trader at Korea Exchange Bank Futures Co. in Seoul. The company was ordered to halt operations at a smelter after a fire broke out yesterday. Operations at another smelter remain suspended after a blast on May 13.

Tin, lead and zinc climbed in London. Nickel fell.

Rusal hikes Aluminum offer prices to Japan to $405/Mt for Q3

The world's biggest aluminum producer United Company RUSAL has raised its aluminum offer prices to Japan, as per the latest reports.

A news from Platts mentioned, the Russian aluminum giant has offered to Japanese buyers, a premium of $405 a metric ton to London Metal Exchange cash, CIF Japan, for third quarter shipments.

The prices are for primary aluminum ingot, sows and T-bars of LME P1020A specification, imported into Japan in the third quarter.

Weak demand, high inventories may continue to drag Chinese Zinc prices down

Overcapacity, weak demand and high inventories will continue to drag down domestic zinc prices, said Shanghai Metals Market.

“High inventories are now exerting a big impact on prices in domestic zinc market,” Suo Fang, chairman of Yunnan Haolong Industrial Group said at SMM’s 2014 Lead&Zinc Summit (May 21-24) held in Qingdao. She expected zinc prices to continue under downward pressure, factoring in soft consumption and capacity surplus.

Despite rising zinc prices, the digestion of zinc stocks was slow, leaving inventories at domestic smelters high at 800,000 tonnes in the first quarter of this year. Chinese zinc smelters generally sit on 2-2.5 months of inventories, she added.

Sluggish prices would bold bad for the whole zinc industry chain in 2014, conference participants said at the Summit.

The Last Time The Market Was This Short, Stocks Crashed

It is common knowledge among those that prefer to see the glass of aggregate demand always half-full (in need of fiscal or monetary stimulus and thus always time to BTFD) that stocks "climb a wall of worry" and that stocks can't drop if so many people are negative. However, while we are sorry to steal the jam from their exuberant 'cash on the sidelines' donut, the truth is that eventually 'strong hand' short positions build to a point where they dominate and provide the tipping point of weakness in stocks. As Goldman Sachs highlights in the following two charts of short interest ratio (days to cover) and aggregate short interest (dollars), the last time there was this much money short was mid-2007... and that didn't end well.

Short interest ratio is at pre-crisis high levels...

and aggregate dollars short is now at levels just before the market crashed...

Yet another market meme broken by the facts of the data...

Charts: Goldman Sachs

Echoes Of 1937 In The Current Economic Cycle

It is not too early to ask how the present US business cycle expansion, already more than five years old, will end. The history of the last great US monetary experiment in “quantitative easing” (QE) from 1934-7 suggests that the end could be violent. Autumn 1937 featured one of the largest New York stock market crashes ever accompanied by the descent of the US economy into the notorious Roosevelt Recession. Should we take comfort from the fact that Friedman and Schwartz, in their epic monetary history, claim to have discovered the policy error by the Federal Reserve which was responsible for the 1937 denouement. And that today’s Fed officials are adamant about having learned their lesson? The short answer is no.

According to the now mainstream narrative, the strong economic recovery of 1935-6 could have continued for much longer if it had not been for the successive hikes in reserve requirements through late 1936 and early 1937, together with the sterilization of gold inflows from the start of that year. This meant the end of rapid growth in high-powered money supply. The trigger for these monetary policy changes was concerns within the Federal Reserve and White House about the intense speculative climate which had developed in equity and commodity markets during 1936, coupled with apparent upward pressure on goods prices. Friedman and Schwartz imply that these concerns were misplaced. And indeed, as regards the rise in goods prices, this was a benign recovery from a deep cyclical low-point in 1933 rather than something symptomatic of monetary inflation. It was, however, quite a different story for asset prices.

The monetary manipulations of the Roosevelt administration in combination with the Federal Reserve (dollar devaluation, monetization of subsequent huge gold inflows, interest rates pegged at zero throughout) had been fueled by 1936 serious asset price inflation most of all in the US equity and commodity markets. Today we recognize irrational exuberance as the salient feature of this monetary disease. Some combination of yield desperation and fears concerning an eruption of goods inflation in the far distant future lies behind the irrationality. The manipulating of long-term rates below neutral also encourages various feedback loops in which rising asset prices appear to justify otherwise wild speculation.

There is no simple empirical test which detects and measures speculative froth. We do not know the “underlying value” which would correspond to a sober rational weighing of all the risks. Traditional benchmarks of valuation such as normal price-earnings ratios are particularly misleading in a period such as the mid-late 1930s when the geo-political, domestic political, monetary, and economic climates are highly turbulent.

Asset price inflation would come to an end even without monetary action. It is sufficient that the real world outside becomes so much worse than what the irrationally exuberant investors have been seeing through rose colored spectacles (which filter out dangers and exaggerate expected returns) that the lenses splinter. In late summer 1937 that is what may well have happened. The rapid economic recovery of 1936 was evidently stalling by mid-1937. In July, Imperial Japan had launched its full-scale invasion of China. German rearmament accelerated following the military re-occupation of the Rhineland. In May 1937 the Supreme Court had ruled in favor of the Roosevelt administration’s trade union legislation. As markets crashed from August through autumn 1937, business confidence and investment plummeted.

The importance of monetary policy actions in late 1936 and early 1937 in contributing to this bad outcome is dubious. When market rates of interest are at zero, high-powered money lacks power, as banks are willing hoarders of large reserves well beyond normal levels (relative to their deposit base). Short-term rates hardly rose in response to the raising of reserve requirements through late 1936 and early 1937. Long-term Treasury bond yields climbed briefly in March 1937 by around 30 basis points to a peak of 2.75 percent before falling back, partly due to evidence of economic slowdown, and partly to a Fed bond-buying program as demanded by the Roosevelt administration. That political intervention surely signaled to contemporary investors that long-run inflation dangers were still live — a positive factor for continuing asset price inflation.

What are the parallels with the present? We have had some similarly ambiguous Federal Reserve policy actions. This time long-maturity T-bond yields have climbed more sharply from their low point (early 2013) but the announced curtailment of QE has so far been less striking. A more important parallel is the amount of irrational exuberance now evident in a range of asset classes (high-yield bonds, European periphery sovereign debts, real estate in various global hotspots, German equities, US financial and technology sector equities, private equity). A failure of the US economy to take off into a higher flight path beyond the winter stall and spring re-bound, disappointment regarding a German economic mini-miracle, a Chinese “hard landing,” geo-political storms, and a host of idiosyncratic factors which could setoff waves of profit-taking, are all possible triggers to asset price deflation and an early end to this cycle.

As we noted previously - it's never different this time...

While chart analogs provide optically pleasing (and often far too shockingly correct) indications of the human herd tendencies towards fear and greed, a glance through the headlines and reporting of prior periods can provide just as much of a concerning 'analog' as any chart. In this case, while a picture can paint a thousand words; a thousand words may also paint the biggest picture of all. It seems, socially and empirically, it is never different this time as these 1936 Wall Street Journal archives read only too well... from devaluations lifting stocks to inflationary side-effects of money flow and from short-covering, money-on-the-sidelines, Jobs, Europe, low-volume ramps, BTFD, and profit-taking, to brokers advising stocks for the long-run before a 40% decline.

Things look eerily similar eh?

But when we look at the headlines in the Wall Street Journal from mid 1936 to mid 1937 as the market topped out (orange oval), dipped, was bought back, then collapsed 40% in 3 months, nothing ever changes...

Government Bailouts Repaid - Bullish Implications...

N.Y. Central Has Repaid All Government Loans
The Wall Street Journal, 978 words
Dec 1, 1936
WASHINGTON Numerous railroad developments here yesterday were climaxed by the announcement of RFC Chairman Jesse H. Jones that New York Central had repaid all of its government loans, totaling $16,858,950, most of which was not due until 1941.

The Buying Is Not Speculation - Cash On The Sidelines...

It's Cash Bull Market With Little Inflation, Says Exchange Bulletin
The Wall Street Journal, 169 words
Dec 16, 1936
"This is eminently a cash market, and as such is relatively devoid of that major characteristic of speculative inflation, the use of borrowed money." says the December Bulletin of the N.Y. Stock Exchange.

Inflationary Side-Effects - Buy It All It's Going Up...

Wheat Prices Soar To 7-Year Highs On Heavy Buying Stimulated by Broad Advances in Foreign Pits
The Wall Street Journal, 1497 words
Dec 19, 1936
CHICAGO An avalanche of buying, encouraged by buoyancy in foreign markets, particularly in Winnipeg, swept wheat prices to the highest levels since December, 1929, Friday.

But... 3 days before...

The Wall Street Journal, 1027 words
Dec 16, 1936
As commodity prices continued to advance yesterday to the accompaniment of increasing public speculation in futures markets, signs of a feeling of caution appeared from widely separated centers.

As Goes The US So Goes The Rest Of The World...

London Trade Stimulated By Wall Street Strength; Averages at New Highs
The Wall Street Journal, 859 words
Nov 6, 1936
LONDON Overnight strength in Wall Street considerably stimulated the stock market yesterday. Dealers again arrived earlier than usual in anticipation of activity in international issues and found large buying orders in these stocks awaiting execution.

Global Economy To Lift Stocks...

London, New York Stock Transactions Largest in Months - British Brokers Stand in Queues to Fill Orders Activity Ascribed to World Efforts to Revive Trade
The Wall Street Journal, 956 words
Oct 8, 1936
Growing realization that the determined international effort now being made to sweep away trade barriers will be followed by improved business conditions throughout the world brought a rush of business to the security markets in New York and London yesterday such as not been seen for months.

Devaluation Always A Winner... (Market Prices Prove Economy Likes It)

Wall Street Weighs Devaluation Effects On U.S. Markets; Sees Little Likelihood of Dumping

 The Wall Street Journal, 1759 words
Sep 28, 1936
Rising security and commodity markets Saturday gave ample indication of the financial district's "bullish" interpretation of the U.S. Anglo-French monetary agreement.

Markets Cheerful Over Devaluation; Morgenthau Not Afraid of Dumping
Selective Buying Here and Abroad Motors and Other Shares Held To Benefit From Improved World Trade Are Strong Commodities Less Responsive International Markets
The Wall Street Journal, 1726 words
Sep 29, 1936
A note of cautious optimism was sounded by leading stock exchanges of the world which were open for business yesterday.

Equity Valuations Irrelevant...

Earnings Yield of 15 Stocks 4.8%, Compared with 9.4% Ten Years Ago
The Wall Street Journal, 1280 words
Aug 7, 1936
Industrial earning power is valued nearly twice as highly in the current stock market as it was ten years ago.

Europe Ever The Optimist Even In The Face Of Dismal Reality...

France Optimistic Despite Continuing European Tension - Growing Franco-English Cooperation Inspires Confidence
The Wall Street Journal, 652 words
Dec 5, 1936
Despite the unabated international tension and sudden menace of a constitutional crisis in Great Britain, the continuance of quarrels between Right and Left wings of the Popular Front, and the persistent antagonism between employers and labor, the general feeling in France is rather optimistic than pessimistic.

Short Covering As Ever...

Active Short Covering Sweeps Grain Prices To New High Levels - Chases Bears
The Wall Street Journal, 1345 words
Dec 2, 1936
New highs for the season were recorded in wheat, corn, rye and oats Tuesday. Spot red winter wheat advanced to the highest level since February, 1929. The sharp upturn, which boosted December corn almost 5 cents, and December wheat about 3 cents, was due principally to short covering by those made uneasy over the sale of an unusually large quantity of spot wheat out of local store, and by generous snowfall over the grain belt. Early in the session the market ruled easy on reports of rain and snow, and predictions for continued unsettled weather.

Government Spending Cuts Cause Concern...

Sabotaging Federal Economy
The Wall Street Journal, 412 words
Dec 5, 1936
Even the modest beginning which is attempted by WPA officials to reduce cost of government by cutting down the relief roles is encountering strong opposition. It is perhaps only natural that the workers themselves should object, although their methods of protesting through "sitdown" strikes, not to mention the violence which has manifested itself, may be open to question. But much more ...

States And Taxes...

Sales Tax Repeal May Unbalance Kentucky Finances
The Wall Street Journal, 1002 words
Jan 14, 1936
LOUISVILLE, Ky.--Repeal of Kentucky's 3% sales tax, effective the moment Governor Albert B. Chandler signs it, probably Wednesday will deprive the state of $3,500,000 of revenue budgeted to the expiration of the biennium ending June 30, 1936 and the counties of $1,750,000.

The Foreign Money Will Save Us...

Financial Centers Expect Greater Foreign Interest in Our Securities As Congress Delays Alien Tax Boost - Foreign Interest Here
The Wall Street Journal, 765 words
Aug 6, 1937
Some resumption of foreign interest...

Money On The Sidelines...

The Wall Street Journal, 590 words
Jul 1, 1937
While the Street remains in a cautious frame of mind, there are undoubtedly more possible buyers than sellers around, and it would not take a lot of encouragement to get these gentlemen aboard. Feeling in brokerage circles is that stocks are more likely to advance on any break in the unpleasant headlines these days than to decline far on a continuation of current uncertainties.

Jobs And Europe never far from fear...

The Wall Street Journal, 683 words
Jun 29, 1937
Certainly the market was more active on the downside, which surprised a lot of traders who had expected otherwise. The labor and foreign situations remain the main factors in the picture, and brokers feel that these have not changed one whit for the better thus far.

Buy The F##king Dip...

The Wall Street Journal, 508 words
Aug 24, 1937
A rather depressed feeling is extant in Wall Street as small volume and lower prices continue.Yet there are not many bears in the Street so far as the long pull is concerned. Traders still are stubborn in their theory that stocks are reactionary at the moment from lack of interest rather than any important liquidation. This is the period of the year when business takes a final breathing spell before the more active Fall and some think the stock market is doing likewise and that better days are ahead.

Rallies had Real Volume Then - No Low Volume Ramps...

The Wall Street Journal, 564 words
Aug 16, 1937
If Saturday's volume was any indication, revived interest in the stock market is here in the opinion of the Street. Furthermore the scope of trading Friday and Saturday indicated a broadening interest which included medium priced as well as low priced issues on contrast to the extended period wherein so-called "quality" stocks held sway in a limited market with small volume.

And At The Top... Brokers Suggest Stocks For The Long-Run (based on 'expectations')

The Wall Street Journal, 665 words
Aug 7, 1937
Profit taking for the week-end brought prices down in yesterday's market, but the undertone remained steady and brokers said there was nothing important in the character of the selling. Many houses were advising the purchase of favored issues on any further reactions. Metal shares ended the day with advances in many cases. There was impressive buying reported in the copper issues largely for long pull purposes.

The Wall Street Journal, 649 words
Aug 10, 1937
While volume left much to be desired, the expectation of stronger and more active markets continued to pervade Wall Street. Moreover, the general business picture is regarded as more pleasing than at any time since the so-called Summer "lull" came into force. Incidentally, the seasonal letdown thus far has not proved to be as extensive as many predicted and expected. Brokers say that many clients are away and that there are others who will be replacing their sold-out long positions in coming weeks.

See - it really is never different this time. It merely appears so since - as Kyle Bass so eloquently noted, the brevity of financial memory is about two years...

Submitted by Brendan Brown via the Ludwig von Mises Institute