Take Oil Inventory Data With a Grain of Salt

♠ Posted by Emmanuel in at 7/27/2016 12:30:00 AM
US oil inventories are more or less known; those of others are a mystery.
There is an informative article over at Oilprice.com on the need for a critical eye when interpreting oil inventory reports. While this data can significantly affect spot prices for two crude oil benchmarks--West Texas Intermediate (WTI) and Brent--there are caveats. Essentially, there are concerns over the coverage and accuracy of these figures. Both these factors should make observers more vigilant.

Consider first that inventory data is largely US-based. Namely, the weekly series provided by US agency the Energy Information Administration (EIA). However, reports from others may indicate contradictory trends:
The EIA data releases are a tradition for the oil markets – the weekly publications spark movements in oil prices, whether up or down. But the tricky thing about international prices trading on these metrics is that they only encapsulate what is going on in the United States.

The markets know very little about what is going on in the rest of the world. As The Wall Street Journal notes in a July 24 article, countries such as China and Russia do not report data on their storage levels. In fact, there is very little transparency on market data in much of the world. “The data itself is so inconsistent,” Harish Sundaresh, portfolio manager and commodities strategist for Loomis, Sayles & Co., told the WSJ. “In countries like Nigeria, Brazil, Angola, it’s not trustable.”


There are a few other outlets that release data on oil trends. The IEA offers some data on stocks from the OECD, which encompasses North America, Europe, and other rich countries. The IEA data shows commercial stocks in the OECD rising by 13.5 million barrels from May to June, reaching a record high of 3,074 million barrels. So that data looks pretty depressing for oil prices.

Also, the Riyadh-based Joint Organisations Data Initiative (JODI), for example, compiles data from the IEA, OPEC and a few other agencies. Data from JODI shows that Saudi Arabia has recently begun reducing its inventories to meet both high levels of demand abroad and domestically. In another example, JODI data revealed a sharp drawdown in inventories in Nigeria, mostly due to the attacks from the Niger Delta Avengers on domestic production. Nigeria’s crude stocks declined by 78 percent between December and May, as outages forced the country to tap reserves in order to keep exports from falling. The JODI data provides some small semblance of bullishness.
Like a Humpty Dumpty of data, putting all of these sources together hardly produces a consistent or satisfactory picture of the world crude oil situation:
But with data from multiple sources, which often conflict with one another, is hard to put it all together. And as the WSJ notes, there isn’t data like this from Russia, China and other non-OPEC members. The lack of transparency makes it difficult to paint a clear picture of what is going on in the oil markets.

China, for example, is filling up its strategic petroleum reserve. When comparing imports to refining production, it appears that there is a surplus, meaning that China is stockpiling crude oil. But much of that is likely winding up in China’s SPR, not necessarily commercial storage. If the SPR fills up, and China dials down its imports, that could be bad news for global oil demand. But nobody knows because of the lack of data.
Bottom line: while more reliable US data is great, America is obviously not the world. Moreover, with different compilers of data using different methods of estimating reserves, you cannot assume that they use comparable measures to produce their data:
But the larger lesson is that oil price volatility is in part a symptom of a shortage of reliable data. The markets move up and down on incomplete and sometimes incorrect information. When the real trends ultimately emerge only months later, prices can react by moving quickly back in the other direction.

The Day Kickass Torrents 'Died'

♠ Posted by Emmanuel in at 7/24/2016 05:07:00 PM
"Hmm...we may not be watching the latest Game of Thrones episode tonight, dear."
Strictly out of [ahem] professional curiosity, I have covered official efforts to crack down on torrent sites distributing copyrighted material for "free," to the outrage of their respective copyright holders. With the most remunerative activities going into intellectual property--and the wealthiest countries being the largest producers of IP--efforts to enforce IP laws will always be there. Most major torrent sites have been harassed or shut down at one point or another--among other: Isohunt, the Pirate Bay, Demonoid, and so on. Despite having their servers located elsewhere in the world, the long arm of US law eventually got around to enveloping them.

For the longest time, however, Kickass Torrents had somehow eluded this fate. Last week, however, the inevitable happened as it too was shut down:
With millions of unique visitors per day KickassTorrents (KAT) has become the most-used torrent site on the Internet, beating even The Pirate Bay. Today, however, the site has run into a significant roadblock after U.S. authorities announced the arrest of the site’s alleged owner. The 30-year-old Artem Vaulin, from Ukraine, was arrested today in Poland from where the United States has requested his extradition.

In a criminal complaint filed in U.S. District Court in Chicago, the alleged owner is charged with conspiracy to commit criminal copyright infringement, conspiracy to commit money laundering, and two counts of criminal copyright infringement.
The snitch was Apple:
The complaint further reveals that the feds posed as an advertiser, which revealed a bank account associated with the site. It also shows that Apple handed over personal details of Vaulin after the investigator cross-referenced an IP-address used for an iTunes transaction with an IP-address that was used to login to KAT’s Facebook account.

“Records provided by Apple showed that tirm@me.com conducted an iTunes transaction using IP Address 109.86.226.203 on or about July 31, 2015. The same IP Address was used on the same day to login into the KAT Facebook,” the complaint reads.

In addition to the arrest in Poland, the court also granted the seizure of a bank account associated with KickassTorrents, as well as several of the site’s domain names. Commenting on the announcement, Assistant Attorney General Caldwell said that KickassTorrents helped to distribute over $1 billion in pirated files. “Vaulin is charged with running today’s most visited illegal file-sharing website, responsible for unlawfully distributing well over $1 billion of copyrighted materials.”
Actually, it is remarkable that it took so long to shut down this torrent tracker, which maintained servers in the US of all places. That's something that not even the Pirate Bay was dumb enough to do:
Perhaps most tellingly, in the first instance KAT failed to learn from the ‘mistakes’ made by Megaupload. While the cases are somewhat dissimilar, both entities chose to have a US presence for at least some of their servers. This allowed US authorities to get involved. Not a great start.

“[Since 2008], KAT has relied on a network of computer servers around the world to operate, including computer servers located in Chicago, Illinois,” the complaint against the site reads. The Chicago server weren’t trivial either. “According to a reverse DNS search conducted by the hosting company on or about May 5, 2015, that server was the mail client ‘mail.kat.ph’.” Torrent site mail servers. In the United States. What could go possibly go wrong?
So, does the Kickass Torrents story end here? Actually, mirror sites have begun popping up all over the place already:
Shortly after KAT went offline dozens of people began promoting mirrors and copies of the site. Some are just trying to keep lost files accessible, but there’s also a group trying to take over the brand, similar to the efforts seen following YIFY’s demise.

For example, the operator of Kickass.la sent an email to several reporters promoting a new KAT address. In a follow-up, we were told that the site is an “official backup,” and that a copy of the database is in their possession. However, the site appears to be little more than a partial copy and the person behind it later admitted that they are not related to KAT.

Only adding to the confusion are the many other copies and alternatives claiming to be the official resurrection of KAT. Some even advertise themselves as such, but most have been available for a longer time as proxy/mirror sites.

Kickasstorrents.to, for example, has been around for a long time, hosting cached pages of the original site. The latter is also true for others, such as Dxtorrent.com. But in any case, there is no true backup with freshly added content available.

Another mirror that has been widely discussed is kickasstorrents.website (which is NOT a project of Isohunt.to, as some reports suggest). Unlike others, the people behind this site are very clear about the fact that they are not related to the original KAT team. Their copy currently lists torrent files from the past one and a half years, but like other mirrors it doesn’t have a working forum or upload functionality.
As with narcotics enforcement, my belief is that torrent sites will not go away for as long as there is demand for their, ah, warez. Just as dozens of mirror sites for Kickass Torrents have sprouted up, there is much additional evidence that torrent sites simply don't die. The Pirate Bay is up and running again is a slightly different guise. Demonoid is back too, this time with a Palau domain [!]

Old torrent sites don't die; they just reappear elsewhere after a while when the Feds' attention has moved on it seems.

Count 'Em! Asia Eclipses N America in Wealthy Folks

♠ Posted by Emmanuel in at 7/21/2016 06:42:00 PM
Come to where the money is: the Asia-Pacific region.
With the world's center of economic gravity heading eastwards, it was perhaps inevitable that the region with the most high net worth individuals (HNWI)--defined as those with $1 million investible wealth or more--would be Asia instead of North America as of 2014. What's more, Asia's HNWI also collectively hold more than their North American counterparts. This happened just last year according to Capgemini's World Wealth Report. Note that unlike the Boston Consulting Group compilation, this one includes Japan:
Asia Pacific raced past North America in 2015 to become the region with the greatest number of wealthy people holding the most amount of wealth on Earth - $17.4 trillion. Capgemini’s annual World Wealth Report, released today, shows Asia’s ranks of high-net-worth individuals popped 9.4% in 2015 to 5.1 million, widening a lead over the ranks of North America’s rich, which grew only 2% to 4.8 million.

That Asia Pacific would top the world was anticipated in 2014 when the region, including Japan, edged out North America to have the most people with at least $1 million in investable wealth. Japan plays a big role in Asia’s leap as together with China it powered nearly 60% of global high-net-worth population growth in 2015, Capgemini says. Japan’s stronger economy, and stronger markets, in 2015 helped buoy the ranks of its rich by nearly 11%, more than double the rate of a year earlier.

China may have had a tumultuous year, but its stock markets ended strong, and the country still had the highest GDP and real estate market growth of all major markets. Japan and China join the United States and Germany as the four wealthiest nations, home to more than 60% of the world’s richest. 
Further, Forbes reckons that there are more billionaires now in Asia than in North America:
The U.S., the world’s largest economy, had more billionaires than any other nation on the new 2016 Forbes Billionaire List unveiled Tuesday, but the Asia-Pacific region taken as a whole easily surpassed America’s total.

The Asia-Pacific had 590 members of the new Forbes list, compared with 540 from the U.S. and 489 for Europe. Last year, the U.S. had 536 members, second to the Asia-Pacific’s 562 billionaires.
The Asia-Pacific this year was led by mainland China’s 251 members, including a world-leading 70 new names.   That new blood –combined with a similarly world-leading 42 dropoffs from the 2015 list – underscores the structural flux in China’s economy and gradual opening up of its capital markets to more businesses.
Aside from the greater volatility in wealth in China--it's easier come, easier go in a less mature region--there is another caveat which I believe should be pointed out: Asia's population is about 4.4 billion, while that of North America is 567 million. Given such a discrepancy, North America with less than 13% of Asia's population obviously still has a higher number of HNWI and billionaires per capita. Put it down to the greater innovative potential of those in the region, especially the United States. Still, this caveat does not cancel out the broader phenomenon of global wealth's shifting geography.

The 1 Percenter: 'Japanification' of US Treasuries

♠ Posted by Emmanuel in ,, at 7/11/2016 01:34:00 PM
How low can you go? US Treasuries do the limbo rock.
There's a depressing article in Bloomberg in which some Japanese prognosticators believe that US Treasuries are headed to where (negative yield) Japanese government bonds (JGBs) already are. First will come sub-1% yields on the 10-year note. Then will come the coup de grace perhaps of negative interest rates. While this prospect is truly horrifying for what it means for the world economy, the Japanese should know a thing or two about a bond world turned upside down where you get less in return for lending out money:
Japan’s biggest bond bulls, seasoned by two decades of economic stagnation, say the plunge in yields below zero in Tokyo foreshadows record-breaking gains for U.S. Treasuries.

Mitsubishi UFJ Kokusai Asset Management says U.S. 10-year yields will drop to 1 percent as soon as this month. Sumitomo Mitsui Trust Asset Management says it’s likely in 2017, and Mizuho Asset Management predicts the figure may go even lower. The yield, a benchmark for everything from U.S. mortgages to dollar bonds in developing nations, plunged to a never-before-seen 1.318 percent last week. A surging jobs report wasn’t enough to derail the rally.

“Welcome to the world of Japanification,” said Hideo Shimomura, the 49-year-old chief fund investor at Mitsubishi UFJ Kokusai in Tokyo, which oversees about $119 billion. “One percent is inevitable.”
His reason is driven by demographics:
Shimomura has 20 years of experience in bonds and has been bullish on Treasuries since 2010, watching the 10-year yield tumble 2 1/2 percentage points as Japan’s slumped all to way to zero. He’s seen the same trends in Japan play out in the U.S., with an aging population and competition from low-cost manufacturers cooling inflation. Higher welfare costs limit room for fiscal stimulus, encouraging monetary authorities to pump money into the economy, where banks park the cash in bonds instead of using it to make loans.

Japan has 26 percent of its population over the age of 65, compared with 15 percent in the U.S., based on World Bank estimates. U.S. baby boomers, born when birth rates spiked for almost two decades after World War II, began turning 65 in 2011, according to the U.S. census bureau. Those 65 and over will almost double in 2050 from 2012’s level, it estimates.
That said, there are reasons why this comparison may be superficial:
  • Unlike Japan's economy which has been in and out of recession, the US is growing at a steady (if unspectacular) 2-point-something-percent rate.  Ditto for Q2 2016;
  • The US fertility rate is only slightly below the replacement rate at 1.9 births per woman, whereas Japan is already depopulating and has a fertility rate of 1.4;
  • Unlike Japan, the US is a country which has traditionally welcomed migrants in large numbers. If it has shortfalls in available workers or domestic demand, it can easily bring in more folks. 
Although this isn't the cheeriest argument, I believe that the US economy's rather better economic performance and prospects relative to that of depopulation- and hence deflation-addled Japan (or Western Europe for that matter) merit higher rates of interest. The wildcard which this article doesn't talk about is the spillover effect of yield-hungry global fixed income investors driving US rates down further. But, strictly speaking, the the US economy in itself isn't in nearly as dire a share as its Japanese or Western European counterparts. Another would be a President Trump who would construct Fortress America complete with a great wall keeping all furriners, but that's another horror story for another day.

Brexit & the Beautician: The Unlikeliest EU Champion

♠ Posted by Emmanuel in at 7/09/2016 03:13:00 PM
Brexit's aftermath has literally had everything, from Tinky Winky to a hairdresser being the UK's would-be savior.
You couldn't make it up. It makes the [political drama] House of Cards look like the Teletubbies - Conservative MP Nigel Evans.

The  utterly misguided outcome of the UK referendum on remaining in the EU has revealed the true colors of a large collection of heroes, rogues, opportunists and others. Amid once-in-a-lifetime market swings, the character of any number of individuals is becoming evident. For instance, crass opportunism, backstabbing and betrayal have characterized the race to succeed outgoing PM David Cameron, the [pardon the language] dingbat who has roiled the global economy in his efforts to keep his party from "banging on about Europe."

Odious characters are found on both the government side--Cameron, Boris Johnson, Michael Gove and so on--and the opposition side--the Labour "leader" Jeremy Corbyn who refuses to resign despite almost all support for him having disappeared among the party's MPs. (His non-effort to get his traditionally pro-EU party to vote "Remain" was the last straw for many.) So many bad guys, so little time.

In a recent post, I have raised the legitimate legal question of proceeding with Article 50--the formal process of leaving the EU--without parliament voting to proceed. Article 50 refers to leaving being possible "in accordance with its own constitutional requirements". The UK, of course, has a common law tradition:
Britain’s lack of a ‘written’ constitution can be explained by its history. [T]he British Constitution has evolved over a long period of time, reflecting the relative stability of the British polity. It has never been thought necessary to consolidate the basic building blocks of this order in Britain. What Britain has instead is an accumulation of various statutes, conventions, judicial decisions and treaties which collectively can be referred to as the British Constitution. It is thus more accurate to refer to Britain’s constitution as an ‘uncodified’ constitution, rather than an ‘unwritten’ one.
Among the key principles here is that parliament is sovereign:
It has been suggested that the British Constitution can be summed up in eight words: What the Queen in Parliament enacts is law. This means that Parliament, using the power of the Crown, enacts law which no other body can challenge. Parliamentary sovereignty is commonly regarded as the defining principle of the British Constitution. This is the ultimate lawmaking power vested in a democratically elected Parliament to create or abolish any law.   
Now, who would you expect to be first to point this out to Conservative lawmakers who intend to circumvent parliamentary deliberation on triggering Article 50 by making the [incoming] prime minister do the deed? Big law firms, perhaps? Actually, the first challenger is--as the title suggests--a hairdresser by the name of Deir Dos Santos:
A U.K. man, described by his lawyer as an “ordinary guy,” filed the first lawsuit seeking to slow Brexit through the courts.

The bid for a judicial review contends that Parliament, not the prime minister alone, must vote to trigger Article 50, which starts the two-year process to leave the European Union, said Dominic Chambers, a lawyer working on the case. Judge Ross Cranston will hold a hearing July 19 to set a timetable for the proceedings.

“The purpose of a judicial review is to correct the executive when they have gone wrong,” Chambers said Friday. “We say the executive will be abusing their powers if they give an Article 50 notification without the approval of Parliament.”
Some fanfare for the common man, please:
A spokesman for Cameron declined to immediately comment on the lawsuit. Chambers said he represents Deir Dos Santos, a U.K. hairdresser. Dos Santos "is just an ordinary guy," Chambers said. "If his rights are going to be taken away, he wants it done in a proper and lawful manner."
When push comes to shove, heroes emerge from the unlikeliest of places. The Brexiteers would like to make a non-binding, advisory referendum into something it is not. Worse, they disregard the huge number of folks who disagreed with them by reinventing parliamentary sovereignty by remaking it into prime ministerial authority:
Oliver Letwin, the minister overseeing preparation for the exit negotiations, told lawmakers July 5 that the prime minister is responsible for starting the exit process, rather than Parliament, citing advice from government lawyers. Those comments prompted the first challenges in what could grow to a wave of lawsuits, Chambers said.
This looks like a legal battle that's set to run and run. Remember, though, who had the guts to be the first in line to contest this nonsense. Whoever Deir Dos Santos is, sensible people the world over are in his debt. In the end, it doesn't take any special insight to figure out that leaving the EU is akin to self-inflicted harm of the highest magnitude.

Let Deir Dos Santos show us the way.

Brexit Issue 27,024: UK Has Few Trade Negotiatiors

♠ Posted by Emmanuel in , at 7/06/2016 03:43:00 PM
Basically, the UK is throwing all this away and must start anew--while lacking folks with trade negotiation expertise.
Let's turn our attention once more to the so-called "United Kingdom". With its nations pulling apart--isolationist England and Wales struggling to keep Europhile Scotland and Northern Ireland from leaving--its self-inflicted wounds are manifold. At the moment, the Financial Times has an incongruously chipper video about the sheer economic stupidity of leaving the EU and alternative trade arrangements that it can now strike with the EU. As you may have guessed, all are inferior to what the UK now has. 

Not wishing to pile more misery upon our British colleagues so keen on messing themselves up in so many different ways through a single act of sheer idiocy, consider this: The UK does not even have enough skilled trade negotiators to strike deals with the EU--let alone all those countries the EU already has trade deals with, and all the rest of the proposed new British trade partners like China and India. After all these years of having the EU do all the negotiating for them as part of the grouping, the British did not really need to develop such specializations. Atop all its losses, please add trade diplomacy skills to the mountainous pile:
The civil service is badly underpowered in some areas, notably in trade. Britain has not negotiated its own trade deal since 1973 when it handed over responsibility to the European Commission. Sir Simon Fraser, former permanent secretary at the Foreign Office, said last month that Britain had 20 “active hands-on” trade negotiators, and would be up against 600 experienced trade specialists in Brussels.

The government is believed to have estimated that it needs between 700 and 750 extra staff to negotiate not just with the EU but with the other countries with which the bloc has trade deals. “The government is going to struggle to gear up to have the bandwidth to properly negotiate the detailed cross-EU and wider bilateral trade deals across the globe,” said Iain Anderson, executive chairman of communications company Cicero.
Actually, working as a trade negotiator in the the public sector is not all that attractive a proposition going forward (as UK economic activity declines due to uncertainty, government revenues fall as a result, and civil servants' remuneration must also). Besides, even UK Eurocrats coming home would not necessarily be keen about dismantling what they helped built--see the image above.
One leading lawyer said staff were not willing to be seconded to government for the task and that the government’s hopes of recruiting enough people from the private sector for the task ahead was “dreaming”.

“The Cabinet Office needs to come down to reality,” this person said. “They will be confronted with people from the EU who live and breathe its rules. They should focus on getting people back from Brussels.”

To compound matters, some civil servants who have devoted their careers to developing Britain’s relations with the EU say they do not have the stomach to spend the next few years unravelling what they have built.
I'll bet you over 99% of those "Leave" voters never even thought of this eventuality, but then again, that's "democracy in action" for you.

European Citizens [Heart] EU More After Brexit

♠ Posted by Emmanuel in at 7/04/2016 06:36:00 PM
Danes are against @#$%ing themselves up, British style.
As an inveterate worrier, I feared that the UK voting to leave the EU in an admittedly ill-conceived referendum would make others in the union clamor for something similar. If enough demanded an exit, it would spell the end of the EU as we know it--and likely the euro currency. (In the era of Trump, you never know.) The domino effect would have been started by the British with likely no end in sight among the other 27.

But surprises of surprises, what seems to be happening instead is that the others are valuing their EU membership more in the aftermath of the shock UK decision. Likely after seeing the pummeling the UK has taken--seen the pound's value lately--cooler heads are prevailing. Consider Denmark, which like the UK chose to keep its own currency and keeps a fair distance as well from Brussels:
Denmark became the latest Nordic country to experience rising public support for the European Union, defying predictions that a U.K. vote to exit would inspire other euro-skeptic corners of the bloc.

According to a Voxmeter poll published by Ritzau on Monday, 69 percent of Danes now back EU membership, up from 59.8 percent in a poll held prior to the U.K. vote. The poll also found that the proportion of respondents wanting a U.K.-style referendum had fallen to 32 percent from 40.7 percent.
UK-style political and economic turmoil are not what they want. It just took some "demonstration effects" to make Britain's nonsense evident to everyone else:
“This poll confirms that nobody wants to put themselves in the kind of mess the British have created for themselves,” said Marlene Wind, a professor in political science at the University of Copenhagen. "Prior to the Brexit vote there were lots of predictions that a British exit would trigger others to put their EU membership on the line.”

Rather than stoking anti-EU sentiment, the financial and political chaos that’s enveloping the U.K. is for now shoring up support for the beleaguered bloc. The Spanish election following the Brexit referendum showed a revival for the main establishment party, while polls across the Nordic region have also indicated rising backing for the EU.
This has put the fear into the rest of the Nordics:
A post-Brexit survey in Finland released last week also saw a surge in support for EU membership to 68 percent, from 56 percent in March. In the other Nordic country’s EU member, Sweden, backing for EU membership was 52 percent, according to a TNS Sifo poll held on June 26. A Statistics Sweden survey published on June 2 put such backing at 49 percent.
 
The Brexit vote had generated "a wake-up call across Europe," with citizens now seeing it as "a big gamble" and associating it with "uncertainty," Wind said.
Can European isolationism and xenophobia finally be staunched by showing what happens when people give in to such small-minded misanthropy? I hate for the UK to have been Exhibit A, but if it stops the others from resorting to similarly rash idiocies, it will at least have served a purpose.

And remember, we have good reason to doubt whether the UK is going anywhere.

Brexit's Biggest Loser: 'Superman' Li Ka-shing?

♠ Posted by Emmanuel in , at 7/02/2016 04:54:00 PM
The person on the left is now trying to mitigate commercial damage from the person on the right's loyal subjects.
Hong Kong tycoon Sir Li Ka-shing [he was a crown subject prior to the colony's 1997 handover and can therefore use this designation] is known as "Superman" for his business acumen. It has turned a high school dropout into Asia's wealthiest or second-wealthiest person [check here]. From his home base, his diversified empire has expanded to much of the rest of the world. Needless to say, while he has made some mistakes here and there, Li has seldom been wrong on big things like betting that the PRC would not destroy the economic dynamism of Hong Kong after its 1997 handover from the United Kingdom to mainland China. 

However, we have recent cause to doubt the supposed omniscience of the great Li Ka-shing. Due to his obvious familiarity with the British, the base of his European operations has always been the UK. Prior to the UK referendum on whether to stay in the EU, he was obviously keen on the country remaining in the EU. However, like many, he has been blindsided by the referendum result as his relative lack of European diversification will cost him in the event of an EU exit.

With over a third of his companies' revenues coming from the UK, pound depreciation, possible loss of EU market access, etc. are giving Li a challenge he probably did not expect:
Brexit is bad news for Li Ka-shing. Since Britain unexpectedly voted to leave the European Union, Li’s CK Hutchison Holdings Ltd. and Cheung Kong Infrastructure Holdings Ltd. have fallen more than 8 percent to be the biggest losers among companies on Hong Kong’s benchmark stock index. The city’s richest man had warned Britons against Brexit, saying it would be negative for the whole continent.

As one of the U.K.’s biggest investors, Li, 87, has a lot to lose. He operates Superdrug and Savers stores, ports, the Three phone service, as well as gas and electricity distribution. His Hong Kong-based flagship CK Hutchison generated 37 percent of its total earnings before interest and taxes from the country last year.
The numbers going forward certainly don't look promising:
"His European exposure will prove to be difficult in the coming years, both from a currency translation perspective, as well as from a fundamental earnings and growth perspective," said Sandy Mehta, chief executive officer of Hong Kong-based advisory firm Value Investment Principals Ltd.
A plunging pound is bad for CK Hutchison’s profits. Every time the currency moves by 1 percent, the company’s recurring earnings would swing 0.5 percent in the same direction, according to Benjamin Lo, an analyst at Nomura Holdings in Hong Kong. Sterling has tumbled about 10 percent in the past two days, the most on record.
Meanwhile, CK Hutchison bonds are beating a retreat.

Another knighted billionaire, Sir Richard Branson, claims Brexit has slashed the value of his companies by a third. Still, Li is particularly hard-hit because his financial reporting currency is in something other than pounds when so many of his businesses are UK-based, and will suffer as a result of already-dramatic pound depreciation. Still, he's had all these years to diversify out of the UK in anticipation of this kind of nonsense. 

At age 87, it will be interesting to see if Li is still up to guiding CK Hutchison to safe harbor one last time as the sun sets of the British Empire once and for all if things go as (un)planned.

UPDATE: See a new Bloomberg profile on the remarkable Li Ka-shing, for whom life goes on Brexit or not.

Brexit is Hardly a Done Deal

♠ Posted by Emmanuel in at 6/28/2016 04:10:00 PM
Cheer up, young people: Isolationist oldsters may not have destroyed your future yet.
For all the market carnage, political upheaval, widespread racial abuse and other things most regrettable brought by the UK referendum result concerning membership in the European Union, keep this in mind: There is still a long process to go were it to leave. On the balance, you could even make a convincing argument that the UK is more likely to stay in. Why? Let me try to explain as concisely as possible. Although there are many ways to prevent the UK from filing its [Lisbon Treaty] Article 50 request to begin the process of separating from the EU, the most likely ones are as follows:

--------------
Scenario 1: UK parliament approval is deemed necessary to start EU departure talks. With the House of Commons far more in favor of remaining, the eventual result will be to stay.
Scenario 2:  A second referendum is held, by which time the UK economy has deteriorated enough to switch many who voted "Leave" to "Remain" to avoid further economic damage to themselves.
Scenario 3: Parliaments of Scotland or Northern Ireland do not consent to dissolving EU Articles of Agreement, effectively "vetoing" the referendum result
--------------
Scenario 1: would play out this way according to some legal experts: It is constitutionally unavoidable for the UK to leave without parliamentary consent based on the text of the now-infamous Article 50. With parliament as a whole far more in favor of the status quo [1, 2] than the general public, the UK stays in. The time it will take to secure a parliamentary vote will likely see the UK economy deteriorate further, making MPs more convinced that staying is the economically sensible move:
Parliament must still vote on a bill to allow the UK to leave the European Union, leading lawyers have said. Geoffrey Robertson QC, who founded the Doughty Street Chambers, said the act which set up the referendum said "nothing" about its impact, meaning it was "purely advisory".
A new bill to repeal the 1972 European Communities Act that took Britain into the EU must now be passed by parliament, he said, adding that MPs might not be able to vote until November when the economic effects of Brexit will be clearer.
"Under our constitution, speaking as a constitutional lawyer, sovereignty rests in what we call the Queen in parliament," he told The Independent. "It's the right of MPs alone to make or break laws, and the peers to block them. So there's no force whatsoever in the referendum result. It's entirely for MPs to decide.
The requirements for starting the process are, again, actually more complex than sending a notification to Brussels:
Mr Robertson said there had been "a lot of stupid statements" suggesting Britain could simply send a note to the EU to trigger "Article 50" of the Lisbon Treaty, which lays out the process under which states can leave. The article itself says a state can only leave in accordance with "its own constitutional requirements".

"Our most fundamental constitutional requirement is that the decision must be taken by parliament. It will require a bill," he said. "In November, the situation may have totally changed. According to polls, a million vote leavers appear to have changed their mind, that could be five million by the November." In a letter to The Times, another leading QC, Charles Flint, of Blackstone Chambers, also stressed that British law required MPs to vote before Brexit could happen.
Geoffrey Robertson fills in more details in a Guardian contribution. Of course, it is possible that elections will be called again before the House of Commons has the opportunity to vote and its membership will differ. However, it is difficult to imagine a dramatic turn towards electing far more anti-EU representatives, especially as the warnings of impending Brexit come true as had been predicted. Who would want to make things even worse in the meantime?

Scenario  2: Another possibility is to simply make the UK vote again. Given the history of previous referendums by member countries on the EU, repeating the process results in the status quo being upheld. Gideon Rachman outlines this possibility:
All good dramas involve the suspension of disbelief. So it was with Brexit. I went to bed at 4am on Friday depressed that Britain had voted to leave the EU. The following day my gloom only deepened. But then, belatedly, I realised that I have seen this film before. I know how it ends. And it does not end with the UK leaving Europe.
Any long-term observer of the EU should be familiar with the shock referendum result. In 1992 the Danes voted to reject the Maastricht treaty. The Irish voted to reject both the Nice treaty in 2001 and the Lisbon treaty in 2008.


And what happened in each case? The EU rolled ever onwards. The Danes and the Irish were granted some concessions by their EU partners. They staged a second referendum. And the second time around they voted to accept the treaty. So why, knowing this history, should anyone believe that Britain’s referendum decision is definitive?
Scenario 3: See below as per SNP leader Nicola Sturgeon's voicing this course of action. That for Northern Ireland would unfold along similar lines.
Scotland's First Minister Nicola Sturgeon has told the BBC that Holyrood could try to block the UK's exit from the EU. She was speaking following a referendum on Thursday which saw Britain vote by 52% to 48% to leave Europe. However, in Scotland the picture was different with 62% backing Remain and 38% wanting to go. SNP leader Ms Sturgeon said that "of course" she would ask MSPs to refuse to give their "legislative consent".

Ms Sturgeon, whose party has 63 of the 129 Holyrood seats, said: "The issue you are talking about is would there have to be a legislative consent motion or motions for the legislation that extricates the UK from the European Union? "Looking at it from a logical perspective, I find it hard to believe that there wouldn't be that requirement - I suspect that the UK government will take a very different view on that and we'll have to see where that discussion ends up."
BOTTOM LINE: The longer it takes for the Article 50 process to begin, the more likely it is that the UK stays in the EU. Its economy getting progressively worse will likely sway many who were marginally in favor of leaving that staying is in their best interests. Hence, they will be more wililng to change their votes in a second referendum directly phrased about filing an Article 50 request at the EU. Alternately, if MPs will have discretion over the matter, it is unlikely that they could go against an increasing tide of public opinion in favor of staying since most of the parliamentarians were in favor of doing so to begin with. If elections are held, it is unlikely that a markedly more isolationist parliament would be elected for similar reasons.

Also, what lawmaker would be foolhardy enough to be directly identified with getting the Article 50 process underway when it is likely to (a) generate even more economic turmoil and (b) dismember the United Kingdom? The more time passes, the more "chicken" lawmakers--and perhaps, more importantly, the general public--will get. It was an ill-conceived misadventure from the get-go, and for all of the bluster of the anti-EU side, sacrificing one's economic well-being seldom proceeds when the consequences of doing so become apparent.

Even the misled get real...eventually. Be patient.

UPDATE: Remember, parliament is sovereign. Here's more scenario 1 commentary to the same effect that legislative assent is required -
[A]s a matter of domestic constitutional law, the Prime Minister is unable to issue a declaration under Article 50 of the Lisbon Treaty – triggering our withdrawal from the European Union – without having been first authorised to do so by an Act of the United Kingdom Parliament.  Were he to attempt to do so before such a statute was passed, the declaration would be legally ineffective as a matter of domestic law and it would also fail to comply with the requirements of Article 50 itself.

UK Dismemberment: On N Ireland Joining Ireland

♠ Posted by Emmanuel in at 6/26/2016 04:29:00 PM
As in Scotland, leaving the UK is afoot in Northern Ireland after the UK referendum on EU membership.
For the UK, the ultimate consequence of deciding not to remain in the EU may be its dismemberment since its constituent parts were very much for staying in the EU. In recent posts, we've covered the cases for Scottish independence (a second one--this time hinging on whether to remain in the EU) and London independence. On the face of it, London declaring independence from the EU is most unlikely as the very heart of England. However, the Scots certainly will have a better chance for leaving the UK to remain in the EU. However, this story does not end there.

Northern Ireland may also wish to secede from the United Kingdom to remain in the EU. As a small trading--I can't seem to call it a nation--region, its economic interests would be better served severing ties on a suicidal UK hellbent on inflicting harm on itself. And so just as there are significant rumblings in Scotland, we have the same in Northern Ireland which voted solidly in the "Remain" camp (55.8%). I am particularly struck by the idiocy of border controls and tariffs being applied to movement and trade between Ireland and Northern Ireland after the Good Friday Agreement helped resolve these issues all those years go:
THE UK’S DECISION to leave the EU means Sinn Féin will press for a border vote in the North. Both Northern Ireland and Scotland voted to remain in the EU, but the leave campaign was able to convince Wales and England to leave the union.

“We have a situation where the north is going to be dragged out on the tails of a vote in England… Sinn Fein will now press our demand, our long-standing demand, for a border poll,” Sinn Fein’s national chairman Declan Kearney said after the UK as a whole had vote to leave the EU. Northern Ireland could now be faced with the prospect of customs barriers for trade with the Republic.

Under the Good Friday Agreement, the Northern Ireland Secretary can initiate a poll in circumstances where it was clear public opinion had swung towards Irish unity.The Republic would then vote on the matter.
Another Sinn Fein figure calling for release is Martin McGuinness:
Northern Ireland's Deputy First Minister Martin McGuinness has called for a border poll on a united Ireland, after the UK has voted to leave the EU. Support for the EU is considerably higher in Northern Ireland than the rest of the UK. As the region shares a land border with the Republic of Ireland, it is unknown how the relationship between the two countries will be affected by Brexit.

Some politicians have speculated a physical border and passport control checks could be errected between the two, while others have questioned whether an effective border will have to be drawn around mainland Great Britain, thereby shutting off Northern Ireland from the rest of the UK.

Northern Ireland also receives considerable financial support from the EU in the form of so-called 'peace money' to fund projects aimed at supporting the region's peace process following the Troubles conflict.
Resembling Troubles-era Northern Ireland, the Democratic Unionists Party--pro-England and Pro-Brexit--will block any attempt to secede. This, of course, sets into motion the possibility of the Troubles erupting once more. Instead of religious divides, it would now focus on the question of Europe. With any consideration of a move to independence dependent on Unionist support, things look iffy. That the incumbent secretary of state for Northern Ireland, Therese Villiers, was a Brexit supporter does not bode well for parliament debating the cause:
Theresa Villiers, the Northern Ireland secretary and leave supporter, has rejected Sinn Féin demands for a referendum on the region’s position inside the UK after Brexit. As towns, cities and communities, such as Newry, that voted to remain in the EU absorb the Brexit shock, Villiers said there were no grounds to hold a border poll on a united Ireland. Theresa Villiers Theresa Villiers speaking to the press on Friday.

In a brief statement on Friday, Villiers said: “The Good Friday agreement is very clear ... There is nothing to indicate that there is majority support for a poll.” Under the rules set down by the 1998 Good Friday peace deal there cannot be a poll on Irish unity or remaining within the UK unless the majority of political representatives of both communities in Northern Ireland [Catholic Irish and their Protestant counterparts] demand it. Given the Democratic Unionist party’s lack of enthusiasm for a border poll it is unlikely the British government would grant one.
It's as though all the centripetal forces within the UK have been stirred at the same time. With England itself being as divided as it's ever been, things are not looking up for the state of the union.