Forget Monte Paschi, Italy May Have A Far Bigger Problem

While the metaphorical ‘earthquake’ of a systemic banking crisis is coming to a head, it appears Italy may have a far more existential problem on its hands. As The Independent reports, one of the world’s most dangerous supervolcanoes is showing signs of reawakening under the Italian city of Naples.

The Campi Flegrei may be nearing a critical pressure point necessary to drive an eruption for the first time in 500 years, according to scientists.

Researchers say the volcano is moving towards a threshold beyond which rising magma could spark the release of fluids and gases at 10 times the normal rate.

This surge would cause an injection of extremely hot steam into surrounding rocks, Giovanni Chiodini, lead author of the study, told AFP.

This could ultimately trigger a “very dangerous” eruption for the three million people living in the area.

Since 2005, the Campi Flegrei  has been undergoing “uplift”, which is the accumulation of magma under the surface of a volcano.

In response, Italian authorities raised the threat level from green to yellow in 2012, signalling the need for the supervolcano to be actively monitored.

Four years ago, scientists warned any eruption could kill millions living near or on top of the volcano.

“These areas can give rise to the only eruptions that can have global catastrophic effects comparable to major meteorite impacts,” said Giuseppe De Natale, head of a project to monitor the volcano’s activity.

Nearby Mount Vesuvius, whose massive eruption buried Roman settlements including Pompeii in AD79, is also considered an active volcano.

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<b>Crude oil</b> prices on the recovery

The reaction in oil prices was immediate. WTI crude and Brent crude rallied by some 10% that day. WTI Crude is now trading roughly at US$52.61 …The post <b>Crude oil</b> prices on the recovery appeared first on

Here Are The Countries Where Millennials Will Have To Work Until They Die

It turns out there is a downside to spending 120% of your annual income every year from the time you graduate college until that day you turn 40 and finally realize that you’re getting old and have absolutely no liquid assets and no hopes of ever retiring.  While the above strategy seemingly makes sense to our elitist, Ivy League-educated central planners at the Fed who have waged a nearly decade-long war on saving (because how can we have economic growth if people aren’t willing to lever their income 5x and spend every dollar they make?), the roughly 19% of Americans who are over the age of 65 and are still forced to work are probably wishing they could go back and do things slightly differently. 

As Bloomberg points out, the percentage of 65 years olds working in the U.S. today is higher than at any point going back to at least 1965.



Unfortunately, this looks to be a record that millennials are destined to beat.  As we recently pointed out (see “Most Millennials Have Less Than $1,000 In Savings, Live Paycheck-to-Paycheck“), the majority of millennials are living paycheck to paycheck.

A recent survey of millennials by found that 51.8% of those aged 18-34 have less than $1,000 held between bank accounts and cash savings.

As Visual Capitalist’s Jeff Desjardins notes, this echoes previous data we’ve seen – not just on millennials, but Americans in general. For example, we know that 14% of Americans have “negative” wealth. We also know that 62% of Americans don’t have emergency savings that could cover a $1,000 hospital visit or a $500 car repair.

Taking that into consideration, here’s a deeper dive into the more recent millennial data…

Courtesy of: Visual Capitalist


Meanwhile, as a testament to their strong work ethic, a study by ManpowerGroup recently found that roughly 30% of millennials envisioned taking an “extended break” from work at some point in their careers to “relax/travel/vacation” while another ~20% said they’d take a break to “pursue a life dream or hobby.”  Sure, why not?  If everything goes horribly wrong then taxpayers will be waiting to payoff your student loans for you…so no worries.



And, unless you thought this was just a phenomenon limited to America’s snowflakes, turns out millennials all over the world have very little confidence in their ability to save.



Well, at least we’re not alone…misery loves company as they say.

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Trump Wins Again – Lockheed CEO Gives “Personal Commitment” To Cut F-35 Costs “Aggressively”

It appears the so-called ‘Twitter-spanking’ approach of president-elect Trump is working. First Carrier, then Ford, and now, following his earlier jab at Lockheed’s F-35 costs by asking Boeing to price-out a comparable F-18, Lockheed Martin CEO Marillyn Hewson has reportedly given Trump her “personal commitment” to “aggressively” drive down costs of the F-35 program. The question is what was the quid-pro-quo in this instance?

Following this tweet from Trump…

Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!

— Donald J. Trump (@realDonaldTrump) December 22, 2016

CNBC reports that:

Lockheed Martin CEO Marillyn Hewson speaks with Trump, says she “gave him my personal commitment” to drive down F-35 program cost “aggressively”


As yet again Trump appears to have won. It is perhaps no wonder though given that 78% of Lockheed’s net sales were from the US GovernmentAs LMT’s Annual report shows:

The F-35 program is our largest program, generating 20% of our total consolidated net sales, as well as 59% of Aeronautics’ net sales in 2015.


In 2015, 78% of our $46.1 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 58% from the Department of Defense (DoD)), 21% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government) and 1% were from U.S. commercial and other customers.

So your biggest customer – by a country mile – is putting pressure on you to cut costs or he will cease his purchases of your biggest revenue producer to your biggest competitor… what would you do?

Maybe having a “dealmaker” in The White House won’t be so bad after all?

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Guess Which Country’s Credit Risk Has Improved The Most Since Trump’s Election

Since Donald Trump’s election, the credit risk of two of the world’s most important nations has diverged dramatically…

Aside from Chile, China’s credit risk has worsened quite notably in the last 7 weeks since Donald Trump was elected.

But, as Bloomberg notes below, Russian credit risk has collapsed. In fact, it’s turning out to be the best December for Russia’s credit risk since at least 2004. The premium paid for protection against a debt default by the government has fallen 21 percent so far this month, the best showing in the world.


Pushing Russia’s market-perceived credit risk back to pre-sanctions lows…


And finally, in case you were curious, USA default/devaluation risk has risen ‘relatively’ notably since the election…

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“2016 Was Weird. Could 2017 Get Even Weirder?” – 10 Things That Won’t Happen In 2017

Yesterday, in a mockery of economists’ and strategists’ recurring fascination with (wrong) year-end forecasts, we presented RBC’s 7 “Costanza Trades” of 2017, or those trades which one would never, in their right mind, put on, which is precisely why in today’s broken, upside down market, these are the trades one should seriously consider. Indicatively, last year’s list of 10 such Costanza trades had 7 winners, some of which (long oil) returned as much as 41%.

Today we look at a different, yet somewhat similar, forecast: a list of 10 things that won’t happen in 2017, courtesy of Lombard Street’s chief European economist, Dario Perkins.  As Perkins puts it, “2016 was weird. Could 2017 get even weirder” and in an attempt to answer, he shares the following, “humorous” (high conviction, non-consensus) take on the year ahead.

* * *

Things that won’t happen in 2017

Last year we wrote about things that definitely wouldn’t happen in 2016. But as it turned out, the reality of the past 12 months was often weirder and more unsettling than our satire. Rather than learn the obvious lesson from this – economists are even worse at making forecasts than everyone assumes – we have decided to have another go. So here’s our alternative outlook for 2017:

1. Ex in the City: As it becomes clear that the UK is headed for a hard Brexit, the mass exodus from London begins. All the major global banks relocate to Paris, Frankfurt, Dublin and Alba (an Italian town, 50km south of Turin, where TS Lombard just happens to have a small office – the wine and truffles are amazing!). Having learnt from the experience of closing down all the coal mines in the 1980s, the Conservative government hits upon a brilliant solution and establishes the City of London Museum. For £20 a head ($2 USD), tourists get to visit mock trading floors where they can see actors in striped shirts and red braces yelling ‘buy’ and ‘sell’ into very large telephones.

2. Fed Apprentice: With Janet Yellen’s term set to expire in January 2018, President Trump begins the search for her replacement. In a televised weekly show, candidates are asked to perform a series of tasks and at the end of each episode the president “fires” the contestant who has performed most poorly (or annoyed him the most). Paul Krugman and Larry Summers both get the chop in week 3 when it emerges they have only one (non-monetary) solution to every problem: infrastructure spending. The eventual winner is a 24-year-old former Miss World with no formal qualifications in economics, who narrowly beats Mr Trump’s own wife in the final. Melania accepts the role of vice-chair and her speeches quickly adopt a familiar tone, particularly a very technical 30-page digression on the US Phillips curve. (EXCLUSIVE – click here for her actual speech)

3. Economists Anonymous: After getting subprime, Brexit and the euro crisis all totally wrong, the economics profession embarks on a much overdue period of self-reflection. EA groups are established in all the major financial centres (not London, obviously) so that disillusioned economists can accept their past forecast errors, discuss what went wrong and, most important of all, admit to each other that they don’t have all the answers. ‘It’s OK to say we don’t know’ becomes the group’s mantra. This new enlightenment is soon reflected in the Op-Ed pages of the global financial press, which are no longer just a source of cheap, unwanted policy advice.

4. Potus App: Sick of having to attend tedious policy briefings with ‘experts’, President Trump designs a simple app that allows him to run the US government without leaving the comfort of Trump Tower. Uber for Potus, as it is soon dubbed, allows the president to make important policy decisions by simple algorithm. Need to deploy the US army overseas? No problem! Send the order via UberPotus and whichever soldiers are closest will respond. But the app is abandoned after Mr Trump confuses it with Twitter, accidentally tweeting his war instructions while simultaneously deploying the Navy Seals to settle a dispute  with Kim Kardashian about whether her dress is really blue or gold.

5. The populist euro: Europe is gripped by populism, but not of the variety Wall Street commentators have been assuming. Instead of national elections in Holland, France, Italy and Germany in 2017, European officials decide to hold one big election via TV vote. Appalled by Brexit and Trump, the people vote overwhelmingly in support of pro-euro candidates with a turnout of 97%. Europe moves quickly and decisively towards full fiscal and political integration. Marine Le Pen, Geert Wilders and Beppe Grillo leave in exile to a small island off the Norwegian Sea, which they promptly declare independent, banning all migrants and failing to see the irony in this policy move. After two weeks, each has formed their own separatist movement.

6. Blackswan crash: After it was revealed that a £1 ($0.005) treble bet in 2016 on Brexit, Leicester winning the Premier League and Donald Trump becoming US president would have delivered winnings of £4.5 million ($20), the world goes low-probability mad in 2017. takes over from Amazon as the world’s most profitable website and investors flock to a plethora of new hedge funds that promise to beat market benchmarks by investing in the extremely unlikely. The Federal Reserve is forced to bail out one of these, Blackswan, after it emerges they staked 80% of their AUM on Brat Pitt getting back together with Jennifer Anniston following his divorce from Angelina Jolie.

7. Carney resigns: After his controversial forays into areas beyond the Bank of England’s core remit (eg social inequality, Brexit, climate change ) Mark Carney finally goes too far in 2017 when he suggests that England will ‘never win the World Cup because they’re just not very good at soccer’. This annoys the British tabloids on various levels, not least his use of the term ‘soccer’ when the correct name is obviously ‘football’. Member of Parliament Jacob Rees-Mogg, Mr Carney’s biggest critic, takes over, but his term is cut short after his immediate 500bp rate hike compounds a Brexit-related property crash.

8. Shang Sky-high: The CCP doubles down and inflates a housing bubble with ‘Chinese characteristics’. The home ownership rate hits 120% as middle class families take out huge mortgages to amass multiple properties in their portfolios. Beijing property prices rise above Monaco’s and someone calculates that the total value of the land on which the Forbidden City sits is worth more than EU’s entire land mass. An academic at Tsinghua University reinterprets Marx’s ‘Capital’ as justifying a property bubble as being in the interests of the proletariat. Chinese companies forget about making stuff and become property speculators, helped by an influx of British advisers. Phil Spencer and Kirsty Alsop move to China to launch ‘Location, Location, Location’ on CCTV.

9. Running Man: After a worldwide economic collapse, American society turns into a totalitarian police state, censoring all cultural activity. The US government pacifies the populace with reality TV. Oh no, hang on, that was just an Eighties’ Arnold Schwarzenegger movie set in 2017. At least there is no chance of that happening.

10. Nobel Perkins: With other sell-side economists, not to mention the Twitterati of global finance, clearly ripping off LSR’s unpatented ‘Things that won’t happen in [Year X]’ idea, Lord Perkins of Kent (as he is to be known) is finally awarded a long overdue Nobel Prize in Economics. The judges admit they have been following his career closely for years, particularly his pioneering work on whether the IFO or PMI is better correlated with German GDP. Perkins becomes a household name after selling the movie rights to Steven Spielberg. Benedict Cumberbatch and Orlando Bloom have a very public falling out over who should play him [Editor – or Rowan Atkinson with his head shaved?]

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