” The present case of Gilead is even more absurd. The company owns the patent on blockbuster drug Sofosbuvir, the cure for Hepatitis C. The company bought the drug from the drug developer Pharmasett, which did all of its R&D in the United States. Yet the intellectual property on Sofosbuvir is claimed by Gilead to be in Ireland for tax purposes. When Gilead fleeces the U.S. government by charging $1,000 for a pill that costs $1 to manufacture, and the money is paid by the U.S. government to pay for treatment of a U.S. citizen in the U.S., Gilead has the chutzpah to book the U.S. profits in Ireland. And they get away with it.
” You can’t make this stuff up.
” But here’s the further twist. The European Governments are seeing how the U.S. companies are getting off without paying taxes. So now the European tax authorities are stepping forward to collect taxes on the profits earned by U.S. tech companies in Europe. And the companies are indeed settling with the European tax authorities for billions of dollars in tax payments — taxes that should be paid, not to Europe, but to the U.S. Treasury.
“As I said, you can’t make this stuff up.
” So the bottom line is as follows. In their interest to garner favor with U.S. companies (mainly in search of campaign funds), the U.S. Congress has allowed these companies to escape U.S. corporate taxes by magically declaring that their IP is located in some foreign tax haven. Yet instead of the money remaining with the U.S. companies, as Congress intended, it is increasingly going into the European tax coffers. “
Rjs – Don’t like exchange traded funds? Why not? Want to see big mutual funds do the same thing with big fees?
There are $2T of listed exchange traded funds. So the $600m redemption you note is equal to 0.03% of the total. Not that big a deal.
And yes, there is a ton of volatility in the global markets. Not just oil.There are currently $7T of government bonds that are trading with a negative yield. We’ve seen $30 oil before, We’ve seen the boom/bust in crude many times, But we’ve never seen the bond market as upside down as it is today.
Bruce, last time i wrote questioning that the trading in just the current crude contract on NYMEX was 100 times the actual oil being produced in this country, you rejoined me with a comment to the effect that that volume was needed for liquid markets and accurate price discovery…
specifically, you wrote here “Hedging is an important part of an efficient company. There has to be intermediaries and risk takers to manage the supply and demand that exists. Turnover falls significantly when there is no price change. It rises when the risk increase.”
no doubt you understand a 3X nverse Crude Oil Exchange Traded Note better than i do…last week’s pricing on WTI started at $33.62 a barrel on Friday and fell to $29.71 a barrel by the close on Tuesday, what ZH called the largest two day drop in oil prices since January 2009 but oil prices turned around and jumped 8% on Wednesdayon the unwinding of that note…after the buying needed to unwind that short selling was done, oil prices fell more than $1 a barrel to close at $31.72 on Thursday, and continued dropping Friday to close the week at $30.89 a barrel, down almost 9% for the week, and obviously have continued to fall since…so could you explain to me how unwinding that 3X nverse Crude Oil Exchange Traded Note made for the liquid and efficent market that you clain this great volume of trading affords us?
Rjs – an ETN exists because one class of market participants wants to sell it, and another class wants to buy it.
In this case a large hedge fund wanted to buy some insurance against a portfolio of energy investments. Long/short investing is nothing new. In this case the hedge (short oil) did work to partially offset losses in oil related common stocks.
So last week this fund made a decision to take the gains on the short crude. This stuff happens every hour every day.
When the ETF was redeemed, it caused Credit Suisse to be a buyer of crude. On that day, CS was a buyer in a world of sellers. As you point out, the sellers have since overwhelmed that demand. But the deal that you are concerned with was a transaction that did have a balancing role in the short term supply demand conditions in the crude market. So I say that it was not a bad thing.
The instability in oil is a result of Saudi Arabia. They want to kill the Iranians and the US Shale producers. The instability is not the result of the futures market, or the options market, or the derivative markets or the leveraged ETN markets. You’re putting things on a good/bad scale. It’s not good or bad, it just is.
i dont think i’m couching it as good or bad, Bruce, as much as i’m sensing that something’s not right…
i mean as much as i dislike big oil for its environmental transgressions, i’m not so naive as to think that i or the country could do without it; like i said last thread we talked, i have some respect for those who get their hands dirty in that business – the guys that work in the oil fields and refineries, those that drive the trucks…but i i can’t see the value of those who sit in a cubicle in new york and trade 100 times more oil each day than the real workers produce…i dont see that those traders are doing anything for me, or for the others out here pumping gas in their tanks everyday to go to their jobs where the real work in the economy gets done…
Rjs Can we agree that there is huge risk out there? Certainly the past 12 months have proven that.
When there are risks, people will find ways to reduce risk. The process of intermediating that risk is what the folks in those cubicles get paid for. Their paycheck is no less valuable than they guy who welds pipe or the guy who digs holes.
Again, you make a good/bad conclusion about something that is neither good or bad.
Not sure I believe the argument that the Saudis want to break the US oil producers. They’re not that dumb. I could believe they’re pumping to cover their budget, or to mess with the Russians (and therefore Assad), or any other number of things, but a drop in oil prices only temporarily reduces capacity in the US. As soon as prices go back up, that production will come right back online again, and they have more than enough Harvard MBAs and Cambridge economists in their government to know that.
Well, there’s 8 or 9% of the Democratic primary electorate that seems to think only Clinton can win in November and that that’s the most important criteria.
The weird thing is, this result and the Iowa result aren’t really all that different, from a raw “how many pledged delegates were awarded” standpoint. Win/lose is a media narrative thing when you’re talking about how many slices of pie you got.
The key problem for Madame Secretary is unfortunately so similar to the same one she had in 2008. Tons of resources and high profile endorsements that don’t actually help her win elections, at least not decisively.
I would further submit that in today’s context her “Invincibility” argument is actually a handicap, one she didn’t suffer as much vs. Bogama, who after all was a product of the same system keeping her viable.
With Bernie the contrast is too big and his organization is just too competent. It’s a bear market in Clinton inauguration futures. Look out below!
How the US Congress Hands US Corporate Taxes To Europe
02/08/2016 Jeffrey Sachs
http://www.huffingtonpost.com/jeffrey-sachs/how-the-us-congress-hands_b_9185988.html
” The present case of Gilead is even more absurd. The company owns the patent on blockbuster drug Sofosbuvir, the cure for Hepatitis C. The company bought the drug from the drug developer Pharmasett, which did all of its R&D in the United States. Yet the intellectual property on Sofosbuvir is claimed by Gilead to be in Ireland for tax purposes. When Gilead fleeces the U.S. government by charging $1,000 for a pill that costs $1 to manufacture, and the money is paid by the U.S. government to pay for treatment of a U.S. citizen in the U.S., Gilead has the chutzpah to book the U.S. profits in Ireland. And they get away with it.
” You can’t make this stuff up.
” But here’s the further twist. The European Governments are seeing how the U.S. companies are getting off without paying taxes. So now the European tax authorities are stepping forward to collect taxes on the profits earned by U.S. tech companies in Europe. And the companies are indeed settling with the European tax authorities for billions of dollars in tax payments — taxes that should be paid, not to Europe, but to the U.S. Treasury.
“As I said, you can’t make this stuff up.
” So the bottom line is as follows. In their interest to garner favor with U.S. companies (mainly in search of campaign funds), the U.S. Congress has allowed these companies to escape U.S. corporate taxes by magically declaring that their IP is located in some foreign tax haven. Yet instead of the money remaining with the U.S. companies, as Congress intended, it is increasingly going into the European tax coffers. “
i was, coincidentially, just reading that article before i got here, Denis…
at any rate, we had some records set in the oil patch last week:
http://www.dailykos.com/stories/2016/2/7/1481521/-new-record-for-oil-and-gasoline-stores-a-record-drop-in-the-US-rig-count-global-rigs-for-January
plus swings in the price of oil the likes of which we have not seen in seven years, driven by the unwinding of a $600 million triple short in the form of an Inverse Crude Oil Exchange Traded Note…as Krasting will tell us, that’s good, it provides liquidity…
Rjs – Don’t like exchange traded funds? Why not? Want to see big mutual funds do the same thing with big fees?
There are $2T of listed exchange traded funds. So the $600m redemption you note is equal to 0.03% of the total. Not that big a deal.
And yes, there is a ton of volatility in the global markets. Not just oil.There are currently $7T of government bonds that are trading with a negative yield. We’ve seen $30 oil before, We’ve seen the boom/bust in crude many times, But we’ve never seen the bond market as upside down as it is today.
Bruce, last time i wrote questioning that the trading in just the current crude contract on NYMEX was 100 times the actual oil being produced in this country, you rejoined me with a comment to the effect that that volume was needed for liquid markets and accurate price discovery…
specifically, you wrote here “Hedging is an important part of an efficient company. There has to be intermediaries and risk takers to manage the supply and demand that exists. Turnover falls significantly when there is no price change. It rises when the risk increase.”
no doubt you understand a 3X nverse Crude Oil Exchange Traded Note better than i do…last week’s pricing on WTI started at $33.62 a barrel on Friday and fell to $29.71 a barrel by the close on Tuesday, what ZH called the largest two day drop in oil prices since January 2009 but oil prices turned around and jumped 8% on Wednesdayon the unwinding of that note…after the buying needed to unwind that short selling was done, oil prices fell more than $1 a barrel to close at $31.72 on Thursday, and continued dropping Friday to close the week at $30.89 a barrel, down almost 9% for the week, and obviously have continued to fall since…so could you explain to me how unwinding that 3X nverse Crude Oil Exchange Traded Note made for the liquid and efficent market that you clain this great volume of trading affords us?
Rjs – an ETN exists because one class of market participants wants to sell it, and another class wants to buy it.
In this case a large hedge fund wanted to buy some insurance against a portfolio of energy investments. Long/short investing is nothing new. In this case the hedge (short oil) did work to partially offset losses in oil related common stocks.
So last week this fund made a decision to take the gains on the short crude. This stuff happens every hour every day.
When the ETF was redeemed, it caused Credit Suisse to be a buyer of crude. On that day, CS was a buyer in a world of sellers. As you point out, the sellers have since overwhelmed that demand. But the deal that you are concerned with was a transaction that did have a balancing role in the short term supply demand conditions in the crude market. So I say that it was not a bad thing.
The instability in oil is a result of Saudi Arabia. They want to kill the Iranians and the US Shale producers. The instability is not the result of the futures market, or the options market, or the derivative markets or the leveraged ETN markets. You’re putting things on a good/bad scale. It’s not good or bad, it just is.
i dont think i’m couching it as good or bad, Bruce, as much as i’m sensing that something’s not right…
i mean as much as i dislike big oil for its environmental transgressions, i’m not so naive as to think that i or the country could do without it; like i said last thread we talked, i have some respect for those who get their hands dirty in that business – the guys that work in the oil fields and refineries, those that drive the trucks…but i i can’t see the value of those who sit in a cubicle in new york and trade 100 times more oil each day than the real workers produce…i dont see that those traders are doing anything for me, or for the others out here pumping gas in their tanks everyday to go to their jobs where the real work in the economy gets done…
Rjs Can we agree that there is huge risk out there? Certainly the past 12 months have proven that.
When there are risks, people will find ways to reduce risk. The process of intermediating that risk is what the folks in those cubicles get paid for. Their paycheck is no less valuable than they guy who welds pipe or the guy who digs holes.
Again, you make a good/bad conclusion about something that is neither good or bad.
Not sure I believe the argument that the Saudis want to break the US oil producers. They’re not that dumb. I could believe they’re pumping to cover their budget, or to mess with the Russians (and therefore Assad), or any other number of things, but a drop in oil prices only temporarily reduces capacity in the US. As soon as prices go back up, that production will come right back online again, and they have more than enough Harvard MBAs and Cambridge economists in their government to know that.
http://www.nytimes.com/interactive/2016/02/09/us/elections/new-hampshire-democrat-poll.html
Exit polls in New Hampshire are interesting reading. Seems Clinton’s primary power base is the Beardstown Ladies.
But but but electability argle bargle….
Well, there’s 8 or 9% of the Democratic primary electorate that seems to think only Clinton can win in November and that that’s the most important criteria.
The weird thing is, this result and the Iowa result aren’t really all that different, from a raw “how many pledged delegates were awarded” standpoint. Win/lose is a media narrative thing when you’re talking about how many slices of pie you got.
The key problem for Madame Secretary is unfortunately so similar to the same one she had in 2008. Tons of resources and high profile endorsements that don’t actually help her win elections, at least not decisively.
I would further submit that in today’s context her “Invincibility” argument is actually a handicap, one she didn’t suffer as much vs. Bogama, who after all was a product of the same system keeping her viable.
With Bernie the contrast is too big and his organization is just too competent. It’s a bear market in Clinton inauguration futures. Look out below!
This is a useful response to Bkrasting’s longing for Mayor for Life to enter the race…
https://twitter.com/billmon1/status/697430972694921216