Foreign-Owned Farms Draining Southwest Aquifers To Feed Cattle Overseas
While the American southwest suffers under a worsening drought conditions, foreign-owned farms have been siphoning water from underground aquifers to grow water-thirsty crops like alfalfa, which ultimately end up overseas in order to feed cattle and other foreign livestock.
“You can’t take water and export it out of the state, there’s laws about that,” Arizona geohydrologist Marvin Glotfelty told CNN. “But you can take ‘virtual’ water and export it; alfalfa, cotton, electricity or anything created in part from the use of water.”
Residents in Arizona’s La Paz County are particularly frustrated at the area’s ‘huge, foreign-owned farms’ which are taking advantage of lax groundwater laws that give agricultural use the upper hand, allowing farms to pump unlimited water underneath property they own or lease.
County supervisor Holly Irwin told CNN that getting the state to take action, or even acknowledge, the state’s dwindling water supply has proven a ‘frustrating’ exercise in futility.
According to Irwin, Middle East agriculture companies “have depleted their [water], that’s why they are here,” adding “That’s what angers people the most. We should be taking care of our own, and we just allow them to come in, purchase property and continue to punch holes in the ground.”
In fact, 80% of Arizona has no laws governing how much water can be drained by corporate megafarms, nor is their any way to track it, according to the report.
“The well guys and I have never seen anything like this before,” said longtime resident of Wenden, Arizona, Gary Saiter, who said a UAE-based company, Al Dahra, had been tapping into an underground reservoir which stores water built up over thousands of years.
[R]ural communities in La Paz County know the water is disappearing beneath their feet.
Shallow, residential wells in the county started drying up in 2015, local officials say, and deeper municipal well levels have steadily declined. In Salome, local water utility owner Bill Farr told CNN his well – which supplies water to more than 200 customers, including the local schools – is “nearing the end of its useful life.” -CNN
According to Saiter, water in the town well has been plummeting – with the depth-to-water level dropping from around 100 feet below the surface in the 1950s to around 540 feet in 2022 – far beyond what an average residential well can reach.
The drought-stricken Middle Eastern expansion into the Southwestern US accelerated after a 2018 Saudi Arabian ban on growing water-thirsty crops like alfalfa and hay to feed livestock and cattle, but they have a ‘national pride’ in the Middle East when it comes to their vast dairy operations.
“They have all their cows there and they need feeding. That feedstock comes from abroad,” Eckart Woertz, director of the Germany-based GIGA Institute for Middle East Studies, told CNN.
For example, the Almarai Company, which owns around 10,000 acres of Arizona farmland under subsidiary Fondomonte, is one of the largest Middle Eastern dairy supply companies. It also owns around 3,500 acres in Southern California which uses water from the Colorado River to irrigate crops.
Woertz said while most of the company’s cattle feed is purchased on the open market, Alamarai took the extra step of buying farmland abroad, as part of a growing trend in foreign-owned farmland in the US. Foreign-owned farmland in the West increased from around 1.25 million acres in 2010 to nearly three million acres in 2020, according to data from the US Department of Agriculture. In the Midwest, foreign-owned farmland has nearly quadrupled.
…
In the high desert of Arizona, emerald-green fields stretch for miles alongside dry tumbleweeds and Saguaro cactus.
The Fondomonte-owned Vicksburg Ranch near Salome is massive. The company spent $47.5 million to buy nearly 10,000 acres of land there in 2014, and it leases additional farmland from the state. -CNN
“It gives you that sense you’re closer to the source,” said Woertz. “The sense that you own land or lease land somewhere else and have direct bilateral access [to water] gives you a sense of maybe false security.”
As outgoing state House member Regina Cobb asked CNN, “Why are we allowing a foreign company to come into Arizona – which is drought-stricken right now – and have a sweetheart deal [on leases], when we are trying to conserve as much water as we can?”
Late on an October morning in a quiet neighborhood near Daytona Beach, Florida. FBI agent Steve Friend sits in his kitchen, fidgeting. He’s a wiry, energetic man, built like a marathoner, not muscled up but exuding fitness, not a sitter. This is not a person meant for desk work, much less staying home all day. But as a whistleblower whose name has been all over media after a complaint about statistical manipulation and other problems in the January 6th investigations, this will be his lot for a while.
By that morning, the first rush of news stories about Friend’s case already passed. CNN and MSNBC demonized him, Fox hailed him as a hero, but the furor was beginning to die down. What a whistleblower talks about in this inevitable moment will say a lot about his or her motivation. Looking out a window into the stillness of his suburban neighborhood, Friend shook his head.
“I love my job,” he said, sighing. “I was living my best life as an FBI agent. I was coming home every day, and my kids were my biggest fan club. Like, ‘Daddy, did you put the bad guy in jail?’ And I thought, ‘Man, this is it.’”
It’s not the tone of a disgruntled malcontent, but someone who made a reluctant journey to whistleblower status, beginning with a whirlwind series of events that brought him and his family out of the Midwest to north Florida less than two years ago. He worked a child pornography detail before being transferred to the assignment that would upend his life: investigating J6. The FBI not only took Friend off vital work chasing child predators to pursue questionable investigations of people maybe connected with the Capitol riots (often in some misdemeanor fashion), they used dubious bureaucratic methods he felt put him in an impossible spot.
Essentially, the FBI made Friend a supervisory agent in cases actually being run by the Washington field office, a trick replicated across the country that made domestic terrorism numbers appear to balloon overnight. Instead of one investigation run out of Washington, the Bureau now had hundreds of “terrorism” cases “opening” in every field office in the country. As a way to manipulate statistics, it was ingenious, but Friend could see it was also trouble.
As a member of a dying breed of agent raised to focus on making cases and securing convictions, Friend knew putting him nominally in charge of a case he wasn’t really running was a gift to any good defense attorney, should a J6 case ever get to trial.
“They’re gonna see my name as being the case agent, yet not a single document has my name as doing any work,” Friend says. “Now a defense lawyer can say, ‘Hey, the case agent for this case didn’t perform any work.’ Labeling the case this way would be a big hit to our prosecution.”
Friend ended up refusing the arrangement, which led to his suspension. He followed procedure, making protected disclosures to superiors and the FBI’s Office of Special Counsel (OSG). He then reported his suspension to Wisconsin Senator Ron Johnson and whistleblower-whisperer Chuck Grassley of Iowa. They sent a letter to Attorney General Merrick Garland, detailing Friend’s procedural objections, including that “agents are being required to perform investigative actions” they “would not otherwise pursue,” at the direction of the Washington Field Office (WFO).
When Friend first complained to his Assistant Special Agents in Charge (ASACs — the FBI is an acronym hell worse than the military), he told them, with regard to J6 suspects: “I’m not a Trump voter. I’m not sympathetic to those people.” The message didn’t get through, however, and leaks from the Bureau have almost universally painted him as an insubordinate MAGA conspiracist.
In fact, most of the press Friend attracted reduced his story to a referendum on the Capitol riots, as if his only complaint was being asked to investigate J6 at all. Big guns were brought out to sell the idea. Former FBI assistant director for counterintelligence-turned-talking-head Frank Figliuzzi blasted Friend on MSNBC as a “self-styled FBI whistleblower” (Figliuzzi, a lawyer, should know better: Friend made protected disclosures by the book and is legally a whistleblower), implying he simply didn’t follow “valid” orders, instead “running to Trump-loving Congressmen” to complain.
But Friend’s complaint is only partially about J6. His concerns began in his first days in Quantico, and continued across years of watching the Bureau collect intelligence or open cases for non-operational reasons. Whether they involve J6 or not, a consistent theme of his stories is the FBI using its authority to “disrupt” or intimidate targets as an end in itself, as opposed to collecting evidence with the aim of prosecuting.
One example involved a British doctor who’d been at J6. The suspect was not exactly Pablo Escobar. He did enter the Capitol, but surveillance showed he meekly stayed behind velvet ropes once inside, and under questioning was practically shaking with guilt over having taken a free Capitol tourist brochure as a souvenir. Though he seemed unlikely to be charged, he was booted from his medical practice after being interviewed, and Friend wondered if this even indirectly had been the point.
“I worried about the process being the punishment,” Friend says. “He lost his job. What does he get from us, if we don’t charge him? ‘Hey, you’re clear? The FBI found no wrongdoing, go pick up the pieces’?”
In the incident that led to Friend’s suspension, the FBI wanted to execute a SWAT raid on a subject who’d been communicating with the Bureau through an attorney and almost certainly would have come in voluntarily. Or, Friend thought, he could have been picked up in another, less dangerous way. The FBI however wanted a show.
“We’re gonna hit this house at six o’clock in the morning and throw flash-bangs and knock the door down and drive a Bearcat up on the front lawn,” recalls Friend, who had extensive SWAT experience and even worked the raid of Michigan militia members suspected of plotting to kidnap Governor Gretchen Whitmer.
He recounts a detail straight out of the movie Idiocracy: the armored Bearcat vehicles the FBI uses in SWAT raids are fitted with special battering-ram-type devices agents call dongers. (No joke. Washington Field Office agents even nickname their Bearcat accessory “DOJ,” for Dong of Justice). Friend describes the lunacy of a federal posse riding into the suburbs to take a door in one of these phallic tanks. “You’re driving down the road with this long extension pole on the front,” he says, laughing. “And I’m thinking, ‘These things were built by the lowest possible bidder.’”
He didn’t laugh so much, however, when he started to get the sense the FBI was opening cases, knocking on doors, and using tactics like SWAT for reasons other than operational necessity.
“I was a little kid and a smart kid in school and I got bullied, bad. That’s one of the reasons I went to law enforcement, and joined the FBI.” He pauses. “My attitude toward the FBI was, ‘You guys are the NFL of police work. You’re supposed to be fighting bullies. I think we might be becoming the bullies here.”
Though he’s been denounced by pundits and Figliuzzi types as an insurrectionist “sympathizer” with nothing legitimate to say, Friend’s complaints in fact track with those of a number of FBI whistleblowers who came before him. Since 9/11, many complain the FBI is hurtling back in time, toward its darkest days under J. Edgar Hoover, when it was a vast, unchecked domestic political spying operation, swinging under a fig leaf of legitimizing law enforcement activity.
The Hoover-era FBI plunged into such infamous excess via snooping programs like COINTELPRO — from trying to blackmail Martin Luther King, Jr. into suicide to opening intelligence files on as many as 500,000 Americans, including a list of 26,000 “to be rounded up in the event of a national emergency” — that Congress in 1975 was forced to intervene. Led by Idaho Senator Frank Church, a Senate oversight committee uncovered deep rot, finding the FBI secretly went “beyond its law” to “disrupt, discredit and harass groups and individuals.”
The Church hearings led to reforms that checked the Bureau’s worst instincts, for a time. Now the beast is back. The FBI not only is deep into the domestic spying game again, it’s accrued broad new powers, including authority to collect intelligence on Americans virtually without limit.
“I would like to think the point of all the intelligence analysis is to create products that are going to help crack a case,” Friend says. “But they’re not. In some cases, there’s no crime. We’re just intelligence, intelligence, intelligence.”
What does an FBI that stresses intelligence, intelligence, intelligence for its own sake look like, in day-to-day practice? No matter your politics, you’ll probably be shocked.
Convicted Elizabeth Holmes Pleads For ‘Lenient’ 18-Month Sentence At Home
Elizabeth Holmes was convicted earlier this year of defrauding investors out of hundreds of millions of dollars following the epic demise of Silicon Valley blood-testing company Theranos Inc. Holmes’ lawyer filed a request to the judge for leniency in the sentencing and requested 18 months of home confinement instead of years in prison, reported Bloomberg.
Ten months after 50 hours of deliberations, the jury of eight men and four women convicted the Theranos founder of three counts of wire fraud and one count of conspiracy to commit wire fraud for scamming investors about the innovative technology Theranos allegedly had to revolutionize blood testing with the simple prick of a patient’s finger.
Her lawyer penned a letter ahead of sentencing next week for US District Judge Edward Davila to overlook her fraudster caricature and instead focus on her as a human being. The memo said she deserved 18 months of home confinement rather than prison.
The memo was accompanied by letters from over 130 friends, family, and even Theranos investors, as well as former company employees who described Holmes as a ‘good person.’
Judge Davila has handled her case since the collapse of Theranos after reaching a valuation of $9 billion. Criminal defense lawyers tell Bloomberg that Holmes’ sentencing could send a warning shot to Silicon Valley companies that run on hopes and dreams.
Another expert said the sentencing of Holmes is to discourage technology startups that blind investors with hype. Holmes’ request subtracts about 18.5 years from the maximum incarceration period she faces for her convictions, with the memo noting that time would be better spent at home than in prison.
“We acknowledge that this may seem a tall order given the public perception of this case,” her lawyers wrote.
They added: the judge shouldn’t view Theranos as “a house of cards,” but as the “ambitious, inventive, and indisputably valuable enterprise it was.”
“The court’s difficult task is to look beyond those surface-level views when it fashions its sentence,” the letter concluded.
Holmes’s memo also expands on her childhood and years at Stanford University. It also touches on life’s traumas detailed in court, such as the rape of Holmes in college.
The memo reiterates her ex-boyfriend and a former executive at Theranos, Ramesh “Sunny” Balwani, of sexual abuse that clouded her judgment. Balwani, 57, was convicted of fraud in July and faces sentencing next month.
Holmes’ scheme defrauded media tycoon Rupert Murdoch, former Secretary of Education Betsy Devos, and Walmart’s Walton family for hundreds of millions of dollars. Defrauding the DeVos family of $100 million in one count alone calls for 9-11 years in prison.
Recent data from the American Trucking Associations found that the average truckload driver made over $69,000 including salary and bonuses in 2021 — an 18% increase from 2019.
At the same time, however, driver compensation — that is, a lack of it — ranked as the No. 1 issue among company drivers and third among all drivers, according to the latest annual survey released in October by the American Transportation Research Institute, which works closely with ATA.
Drivers also ranked detention/delay at customer facilities among their top concerns. The U.S. Department of Transportation estimated in 2018 that time lost waiting to pick up and drop off freight costs commercial truck drivers over $1 billion in annual pay.
Many of those drivers believe that the best way to address both issues is for the government to step in and require that trucking companies pay their drivers overtime.
“The big guys get away with cheap labor because they don’t want to pay overtime. The big box shippers get away with detaining drivers because nobody charges them. The big carriers don’t charge the shippers because they don’t want to lose the freight,” Lewie Pugh, executive vice president for the Owner-Operator Independent Trucking Association, told FreightWaves.
“We spent years trying to figure out how to get people’s attention on this, and with trucking being so diverse — what you haul might take 15 minutes, what I haul might take four hours — we decided the simplest thing is to remove an exemption from the Fair Labor Standards Act (FLSA) so that truckers could get paid overtime. Right now, they’re working 70 hours a week or more.”
Overtime pay legislation pending
OOIDA is a principal backer of the Guaranteeing Overtime for Truckers Act, legislation introduced in the House in April and in the Senate in September that would repeal the motor carrier exemption in the FLSA that excludes company drivers from overtime protections. Pugh estimates that roughly 10-15% of OOIDA’s membership consists of company drivers.
“If this legislation were to pass, the big carriers would be able to pressure shippers and receivers to load their drivers who are on the clock sitting at the loading dock,” Pugh said. “And raising driver pay will raise the rates, which will have a downstream economic effect whereby the smaller owner-operators will be able to raise their rates as well.”
A third-party logistics executive also sees benefits to providing overtime to truckers. “While this wouldn’t help us directly, we care about the drivers we use and whatever affects them positively would affect us,” Dimitre Kirilov, president of consumer services at Montway Auto Transport, a Chicago-based 3PL, told FreightWaves. “Transportation touches everything — we all pay the bill at the end of the day.”
OOIDA and other backers of the legislation seem to have firm support from the Biden administration. Repealing the trucking industry’s FLSA exemption was highlighted in the U.S. Department of Transportation’s supply chain vulnerability report released in February.
DOT Secretary Pete Buttigieg himself said that driver recruitment should not become a “leaky bucket” if new drivers end up leaving due to a pay gap with other industries. “Rather, we make sure that the working conditions and the compensation reflect the fact that those jobs are absolutely essential,” he said.
And the Federal Motor Carrier Safety Administration recently contracted a study with the Transportation Research Board, as required by the infrastructure law passed last year, on how various methods of driver pay — including getting paid by the hour — affects safety and driver retention.
Opposition to overtime pay is fierce
But getting the legislation passed will be an uphill battle. ATA is actively lobbying against the bills, arguing, among other things, that mandating overtime would require the industry to revamp compensation models that have been in place for decades but “likely resulting in no net change in the total compensation to truck drivers,” according to the group.
Instead, the threat of wage and hour litigation “will inevitably force employers to manage driver workloads with a focus on limiting liability and economic downside rather than on safety, efficiency, and levels of service for freight customers,” ATA contends. “Such a change would limit trucking capacity nationwide, drive up freight costs, slow the movement of goods, and threaten highway safety.”
Jim Mullen, who served as acting administrator at FMCSA during the Trump administration, acknowledged that driver pay remains an issue but that getting rid of the FLSA is not the way to go.
“There are some segments of the industry where drivers are being taken advantage of, and that needs to be corrected,” Mullen, now head of his own consulting firm, Mullen Consulting LLC, told FreightWaves. It’s been a problem for some time, and you would hope that the marketplace would eventually correct that.
“But as far as eliminating the exemption under the FLSA for interstate trucking, it’s a good concept in theory. In practice, it would create a rather large shift for both drivers and carriers in how they look at the labor force.”
Manhattan “Luxury Rent Through The Roof” Despite “Overall Market Peaks”
The Manhattan rental crisis appears to be softening, although rents for luxury apartments continue to soar to new extremes.
In October, the median rent on new leases for luxury units in the borough reached a staggering 13% from September to $13,000, according to Bloomberg, citing data from Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.
“Luxury is through the roof relative to the balance of the market,” said Jonathan Miller, president of Miller Samuel.
Demand for luxury apartments comes as the national average 30-year mortgage rate is above 7% for the first time since 2000, pushing price-sensitive wealthy New Yorkers away from purchasing mansions due to economic uncertainty and or affordability.
Rents for the most expensive apartments are up nearly 50% since October 2019, outpacing the non-luxury rents by 15%.
“That trend is continuing even as the overall market peaks,” Miller added.
Median rent prices for the bottom 90% of the market slightly cooled further but off the peak, dropping $21 to $3,850.
After a summer of “record number of records” for the median rent of all apartments, it wasn’t until August that prices peaked and then reversed.
“Rents are robust but they are starting to plateau,” Miller said in September.
Again, it appears we were right about the fall cooling if you’re signing a lease agreement for a non-luxury apartment.
There’s more good news. The share of leases signed after fierce bidding wars fell last month from around 20% to 14.2%. But those signing new deals still paid a 13.1% premium more than the list price, a record.
Data from brokerage Corcoran Group show inventories increased last month, the highest in 14 months. More apartments available will help continue cooling through the rest of the year.
As for the luxury market, well, the bankers on Wall Street can afford it, or maybe not, because their bonuses this year will be slashed. For the average person looking to rent in Manhattan, at least now the cooling period has begun, though perhaps wait until 2023 to lock in a contract when rent prices likely slide some more.
It’s certainly possible to be disgusted, but being disabused of the fantasy that the system is self-correcting is the healthier perspective.
I used to be disgusted, now I’m disabused: beneath all the self-serving narratives, fad-memes and over-simplifications regurgitated as serious analysis, these are the core dynamics I see:
1. Imperial corruption of democracy and open markets. I described this in Regardless of Who’s Elected, Imperial Corruption Rules the Nation: the dynamic adaptive churn of unfettered representative democracy and open markets are anathema to insiders, vested interests and elites, each of which has gained asymmetric power by subverting democracy and markets to serve their private interests rather than the public interest / common good–phrases that are meaningless to insiders, vested interests and elites except as simulacra used for PR.
2. The Deep State, the unelected and unaccountable Administrative State. I’ve been discussing the Deep State before it entered common use–for example:
The Administrative State has existed in some form in every nation-state / empire, but the U.S. Deep State only gained its vast global powers in World War II and the Cold War, where the lesson learned was the public may choose unwisely (for example, choosing appeasement over preparation) and so the really important decisions needed to preserve the nation cannot be left to parochial politicos in elected office–those decisions must be in the hands of those who know what has to be done.
Democracy is the rubber stamp for doing what’s necessary. Beyond that, it’s a potentially fatal hindrance. That’s the mindset of the Deep State, and if you and I were in upper-echelon positions in the Administrative State, we’d agree with this mindset when things get serious.
This mindset is a self-reinforcing group-think feedback loop: those who believe the public should set policy are weeded out, either by self-selection or via being sent to bureaucratic Siberia.
We’re protecting you. That’s all you need to know.
This opens the door to functionaries who came to do good but stayed to do well, i.e. those with the right credentials and connections to enter the Power Circle to “serve the public” but soon become insiders maximizing their own private gains. That’s the problem with the Administrative State: it’s ultimately unaccountable, not just to the public or elected officials but to itself.
3. Vested interests block adaptions that threaten their share of the spoils. Any advance that increases efficiency and productivity and furthers the public good is squelched, suppressed or co-opted by vested interests who rightly fear their share of the spoils might be diminished by advances that obsolete their particular cartel, monopoly or other embedded skim, scam, fraud, embezzlement or simply unproductive dead weight.
The status quo is thus locked into a death spiral as gatekeepers, insiders, vested interests and sold to the highest bidder politicos will protect vested interests even as the engines flood and the ship begins its long descent into the void.
How do otherwise smart people become so blind to what’s going on? They believe the status quo is so wealthy, so powerful, so clever, etc., that it will overcome any obstacles or crises because it’s always done so in the past, and so it is permanent, immutable, forever, and our supping at the trough of free money couldn’t possibly weaken such an enduring Leviathan.
This is the fatal fantasy of every empire. We’re too successful to fail and collapse. But oddly enough, faith in the permanence of success leads to the very collapse that’s deemed “impossible.”
4. Concentrations of wealth, power, capital and production fatally distort the economy and the social order. When “competition” has been reduced to two telecoms, two healthcare insurers, two pork processors, etc., the system has been stripped of adaptability and resilience.
When 10,000 small farmers each have 100 chickens, the stock of 1 million chickens is spread over a wide geography and entrepreneurial network of suppliers, wholesalers, etc. Bird flu may spread widely but it’s far more difficult to wipe out 10,000 small farms’ poultry compared to the ease of bird flu spreading in one giant factory that concentrates 1 million chickens in one facility. Supply chains stripped of network resilience are equally fragile and prone to disruption and collapse.
Concentrating any form of capital, production and power renders the system vulnerable to collapse due to the inherent weaknesses generated by replacing complex networks with vertical-integration under the control of a few cartels, monopolies, autocrats, gatekeepers or regulators–the latter two being easily influenced by political pressure and/or private gain.
It’s certainly possible to be disgusted, but being disabused of the fantasy that the system is self-correcting is the healthier perspective.Everything is forever until systemic weaknesses reveal themselves, typically at the most inopportune junctures.
The current oil market climate is complex, to say the least.
Europe is preparing to enact its embargo on Russian oil and refiners are scrambling for alternatives.
Many searching for new sources of crude have landed on Middle Eastern producers as a potential alternative.
While the world has slapped a wide variety of sanctions on Russia in the wake of Vladmir Putin’s illegal invasion and partial annexation of Ukraine, most of them have been relatively toothless. To hit Russia where it hurts, the world has to stop buying energy from the oil and gas titan. But slapping energy sanctions on the Kremlin while Europe was dependent on Russian oil and gas to keep the lights on would have been a pyrrhic victory at best.
Finally, Europe is in a position to start getting serious about energy sanctions, but securing enough extra energy supply to replace Russian imports will be no easy feat.
Indeed, as Europe has inched closer to easing its energy dependence on Russia and has ramped up its sanctions on Russian energy bit by bit, the Kremlin has hit back hard, and European markets are still reeling. In early September when G7 countries agreed to impose a price cap on Russian oil, Russia responded by shutting off the flow of gas through the Nord Stream 1 pipeline completely within a matter of hours, citing suspiciously timed maintenance.
While this overnight loss of crucial energy supplies worsened an already dire energy crisis in Europe, it also galvanized the development of new energy sources and trading partners. In fact, while Europe’s energy crisis remains serious, it has not been as devastating as many experts predicted. Energy demand has fallen in response to skyrocketing prices, and alternative energies have risen to the occasion. As part of the effort to replace Russian energy imports, 18 out of 27 countries in the European Union set new records for solar power generation this year. In the wake of these developments, Europe is ready to throw down the gauntlet. In less than a month European Union nations will no longer be legally allowed to purchase seaborne cargo from Russia as the bloc continues to ramp up sanctions against the Kremlin.
While the boost in solar energy is hopeful news for Europe and for the climate, however, this added production capacity will only cover a fraction of the energy needed to fill the massive void left by Russia in Western energy markets. While the result will be an economic downturn for both the European Union and Russia, there will be a major winner: the Middle East.
Already, oil refineries around the world are rushing to secure deals and guarantee supplies of crude oil from the Middle East for the coming year.
However, some of the refineries scrambling to secure term contracts may be denied their requests, as OPEC+ has already agreed to impose a major production cut, much to the West’s dismay. Starting this month, OPEC+ will cut production quotas by a whopping two million barrels per day. While the United States has publicly condemned the move, saying that the oil cartel is propping up Russia, OPEC nations had legitimate economic self-interest in propping up oil prices. Worried that a coming global recession and continued lockdowns in China will decrease oil demand, OPEC member nations are trying to protect themselves from next year’s potential losses.
As a result, oil importing countries are looking at a complex picture: on the one hand, global oil demand could fall considerably in the coming year; on the other hand, if Europe starts snapping up Middle East crude, it could lead to “intensifying competition for spot cargoes from the US, North Sea and even the Persian Gulf.” That’s according to World Oil, who report that Europe’s sudden interest in non-Russian oil could lead to difficulties for Asian importers. According to that report, “cargoes from the North Sea and Kazakhstan are also getting increasingly snapped up by Europeans, leaving fewer options for those Asian refiners that have shunned Russian barrels.”
All of this is to say that the outlook for oil markets in 2023 is complex, to say the least. Indeed, the current economy is throwing out all kinds of mixed messages and confusing indicators that have even top-level experts confused about which way the winds are blowing. With all this uncertainty in the air, it’s a tough climate for big energy decisions.
Wall Street’s Biggest Bear Buys The Dip: “I Don’t Think This Rally Is Over”
Less than a month ago, as the S&P 500 face-ripped higher off the mid-October puke opening lows, Wall Street’s biggest bear – Morgan Stanley’s Mike Wilson – warned traders that this rally could have legs…
… we may get another overshorted, oversold rally on Monday and we may get a powerful bear market rally in November that pushes stocks to 4,000 or higher by year end, but the bear market won’t end until the Fed pivots. The timing of that still remains to be determined, however after the midterm elections when the political blinders drop, we expect that the full – and dire – picture of the US labor market will finally emerge and shock everyone, especially the Fed.
Today, following the softer than expected CPI print, Wilson reiterated during an interview with Bloomberg TV that the recent rally in US equities isn’t finished and should keep running over the coming weeks.
“There’s probably further to go, probably through Thanksgiving, maybe even into early December,” Wilson, the bank’s chief US equity strategist, said in an interview on Bloomberg Television on Friday.
“I don’t think the rally is over at this point.”
But once the S&P 500 breaks through its 200-day moving average, which currently sits around 4,081, that may “get the animal spirits going” and draw in more passive flows, he explained.
That could propel the broad index to 4,200 or 4,300, he added.
As rates begin to ease back this week, Wilson confirms that will help alleviate pressure on longer-duration assets like growth stocks, which will help lead to the next leg of the equity rally,
“As rates come down… the Nasdaq, which has been the laggard in this rally so far, can now catch up,” Wilson said.
“That’s tied directly to the move in rates.”
Of course, there is downside risk as Wilson hedged in October, “if this market cannot hold the 200-WEEK moving average, then it’s likely there will be no meaningful countertrend move. Instead, we can make straight shot to 3400 or lower. A break below last Thursday’s lows would seal the deal in that regard, in our view.”
“It’s going to remain volatile,” Wilson cautioned.
“It’s still a bear market so it could rip you apart.”
Finally, Wilson pointed out that US equities have held up despite the selloff in cryptocurrencies in the wake of the meltdown in Sam Bankman-Fried’s FTX crypto empire.
“Clearly, this overhang from crypto isn’t constructive,” Wilson said.
“We’re having this event, which is a little bit scary, and yet the market was up…which tells me that people were just out of position.”
We do note that cryptos tried to rally on the CPI print (green box), but the overhang from FTX is too strong…
The gains this week, as rates fell, have been all valuation-driven as P/Es soared. However, as the Morgan Stanley equity strategist explained, while P/Es are close to fair value assuming EPS estimates are correct; they’re still not.
In other words,“until earnings fall, the market can dream and P/Es can even increase if rates come down.”
But, those P/Es will soar dramatically rich if/when the ‘E’ is repriced… and if the market really thinks The Fed will be cutting 50bps in H2 2023 (as seen below), then equity valuations are clearly not pricing in the only thing that would prompt The Fed to pivot that aggressively dovish – a recession…
Finally, Wilson noted, “we do think this ultimately is a bear-market rally.” And we have seen this kind of bounce before…
Senator Ted Cruz has claimed that the reason Democrats did better than expected in the midterm elections is because for the past two years they have focused on engaging and exciting a “left wing nut-job” base of young voters.
Appearing on Hannity, Cruz stated “Here’s a lesson to take from last night. Look, why do the Democrats do better than expected? Because for two years they’ve governed as liberals. They’ve governed as whacked-out lefty nut jobs.”
“You know what that did?” Cruz continued, explaining “That excited their base, excited a bunch of young voters that came out in massive numbers because when you actually stand for something your base gets excited.”
“There’s a lesson for Republicans to learn,” the Senator declared, adding “when we have a majority next year, we damn better well act like it and use it, hold this administration to account.”
“We need to be happy warriors. If we do that, that leads to victory. If we don’t stand and fight, then we don’t win,” Cruz concluded.
Watch:
Did Democrats, some of them barely able to function and some of them even dead, manage to enagage the Tik-Tok voter?
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South Korea On Defensive After Secret Deal To Supply Munitions For Ukraine Exposed
South Korea is insistent that its official policy of not sending arms to the Ukraine conflict has remain unchanged, even as news is breaking of a secret deal to sell 100,000 artillery shells to the United States, who then reportedly intends to transfer them to Ukraine.
News of the controversial deal was first reported in The Wall Street Journal. “South Korea will for the first time sell artillery shells destined for Ukrainian forces through a confidential arms deal between Seoul and Washington, a move that reflects a global scramble for munitions after months of war with Russia.”
“US officials familiar with the deal said that the U.S. will purchase 100,000 rounds of 155mm artillery ammunition that will be delivered to Ukraine, enough to supply Ukraine’s artillery units for at least several weeks of intensive combat,” the report continues.
A US official confirmed separately to Reuters on Friday that the Pentagon indeed plans to send the South Korean-manufactured shells to the Ukrainian army, utilizing the Ukraine Security Assistance Initiative (USAI).
And interestingly, “The official warned that news of the talks being made public could threaten the deal.”
The confidential plan being made public has already put Seoul on the defensive, with South Korean military officials asserting that the “confidential” negotiations were being conducted “under the premise that the US is the end user.”
The defense ministry is framing it as making up for deficiencies in US stocks. “In order to make up for the shortage of 155mm ammunition inventories in the US, negotiations are ongoing between the US and Korean companies to export ammunition,” a statement said. And more:
South Korea’s Yonhap News Agency reported on Friday that the country’s defence minister Lee Jong-sup and US Secretary of Defense Lloyd Austin had “agreed ‘in principle’ to proceed with the artillery deal” during talks earlier this month.
“But the allies are having related talks under the premise that the materials will be used by the US,” Yonhap reported, citing a statement from the country’s defence ministry.
Last month South Korean President Yoon Suk-yeol’s responded to warnings from Russia’s President Vladimir Putin that arming Ukraine would destroy bilateral ties.
We’ve started scouring the world for artillery ammo.
South Korea will sell 100,000 155mm shells to the US for Ukraine. But that’s only enough for a few weeks.
Russia is said to be getting rounds from North Korea. https://t.co/0cYTNdd3TI
“We’ve provided humanitarian and peaceful assistance to Ukraine in solidarity with the international community but never lethal weapons or any such things,” Yoon said at the time. “In any case, it’s a matter of our sovereignty, and I’d like you to know that we are trying to maintain peaceful and good relations with all countries around the world, including Russia.”
Controversy has also raged regarding North Korea. Pyongyang has long stood accused by Washington of doing secret weapons transfers to the Russian military, something both sides have denied. US intelligence has charged that North Korea is seeking to carefully conceal these shipments, however, there’s been no evidence of such large scale arms or artillery transfers.
