Sweden: a government is finally formed

Stefan Löfven of the Social Democrats won a second term as Prime Minister of Sweden. It took over 4 months for the Swedes to form a government. Why did it take so long?

Here's a summary of seat totals between the two major blocs (Centre-left and Alliance) and the Sweden Democrats.

Centre-left bloc parties (144 total seats):

Social Democrats (100 seats)
Left Party (28)
Green Party (16)

Alliance parties (143 total seats):

Moderates (70)
Centre Party (31)
Christian Democrats (22)
Liberals (20)

Sweden Democrats (62)

The problem is that in Sweden an alliance needs 175 votes to win a majority rule. Neither bloc had 175 votes and neither were willing to form a government with the far-right Sweden Democrats. Another option is the minority government, which is what happened.

So how was Stefan Löfven able to form a government? The Guardian provides the details:

Löfven’s second attempt was approved because although only 115 MPs voted in favour and 153 against, with 77 abstentions, there was no majority against him. Under Swedish law, prime ministers can govern as long as a majority in parliamentary do not actively vote against them. The former welder and trade union leader succeeded in peeling the Centre and Liberal parties away from their centre-right bloc by offering major concessions, promising notably to cut taxes, reform the rental housing market and relax Sweden’s strict employment laws.

WSJ: Shale estimates overly aggressive

The Wall Street Journal recently had an article that looked into projections by fracking companies between 2014 - 2017. Via Rystad Energy AS, WSJ came to the conclusion that actual oil and gas production would come in 10% lower than estimated. This excluded oil majors such as Exxon Mobil. Some of the interesting points from the article are:

1. The Journal’s findings suggest current production levels may be hard to sustain without greater spending because operators will have to drill more wells to meet growth targets. Yet shale drillers, most of whom have yet to consistently make money, are under pressure to cut spending in the face of a 40% crude-oil price decline since October.

2. Schlumberger Ltd. , the oil-field-services giant, reported in a research paper that secondary shale wells completed near older, initial wells in West Texas have been as much as 30% less productive than the initial ones.

3. One reason thousands of early shale wells aren’t meeting expectations is that many companies extrapolated how much they would produce from small clusters of prolific initial wells, according to reserves specialists. Some also excluded their worst-performing wells from the calculations, which is akin to eliminating strikeouts when projecting a baseball player’s batting average.

Venezuela: Maduro's new presidential term

Washington Post reports that this past Thursday, President Nicolas Maduro started his new six year term. To celebrate his new term, the opposition went after Maduro:

The opposition-controlled National Assembly — stripped of its powers by Maduro in 2017 — declared the president an “usurper” and called itself the country’s only “legitimate power.” The assembly’s newly named president, Juan Guaidó, said in a video statement that the body would work with foreign powers toward a political transition in Venezuela.

The article goes on to state that one of the problems with the opposition is that they can't put together a coordinated plan to dispose of Maduro. Also, Maduro has threatened to dissolve the National Assembly.

Al Jazeera makes the real points on why it will be difficult to get rid of Maduro even if "a recent survey by the country's most reliable pollster, Datanalisis, found that nearly 72 percent of people wanted Maduro to resign, rather than begin his second term."

Sweden: Post Christmas Election News

Sweden put discussions regarding forming a new government to the side until after Christmas. For those following Sweden political affairs, elections in September 2018 left both political blocs (Centre Left - Social Democrats, Left Party, Green Party - and Alliance - Moderates, Centre Party, Christian Democrats, Liberals) without enough votes to win a vote on the next Prime Minister. This is driven by the fact that the Sweden Democrats (a far right party) did so well in the elections and neither bloc (or at least a portion of the Alliance bloc) wishes to work with them. Sweden has already attempted two votes for Prime Minister. Both failed and there are two more votes schedules for January 16th and January 23rd. If the next two votes fail, a new election will be held.

The Local (3 January) had the following to say:

On Friday, the leaders of the centre-left Social Democrats and centre-right Moderate Party will meet the parliamentary speaker to update him on any progress made over the Christmas break. The three also spoke directly after Christmas, but a statement from parliamentary speaker Andreas Norlén merely said that he had "taken note of their respective assessments of the process of government formation".

The article also mentions that no one knows who will be running for Prime Minister on the January 16th vote.

California: Sacramento budget and the stock market

CNBC has an article up on how the recent December stock market correction might impact California's budget:

December's ugly stock market is very bad news for California's finances. That's because the state's top 1 percent of personal income tax earners — roughly 164,000 tax returns — generate about half of the personal income taxes in California.

That's right, 1 percent of tax earners pay half of all personal taxes in California. The article later points out that 70% of the state's total general fund revenue and transfers (not exactly sure what is a transfer) is via personal taxes. So that means 35% of all general fund revenue and transfers is driven by the 1 percent.

Venezuela: Military Control of the Oil Industry

Reuters wrote a lengthy report on Venezuela's oil industry and the role of the military. Petroleos de Venezuela SA (PDVSA) is Venezuela's state-owned oil company. In November 2017, President Madura placed Major General Manuel Quevedo in charge of the company. Since then, not much good has happened. Per the article, oil production has dropped 20% to 1.45 million barrels per day. Employees continue to leave, dropping 27% since 2016, currently at 106,000 (estimate). Here are some quotes about the increasing role of the military:

Military chieftains, moonlighting in the private sector, are elbowing past other contractors for lucrative service and supply business with PDVSA.

Quevedo has appointed more than 100 aides and advisors from the military and from a previous post as a government minister to senior positions, according to a person familiar with PDVSA’s human resource records.

Back in November 2017, Reuters had an article that focused on the arrests of US citizens who worked for Citgo, but it also discussed a larger crackdown on corruption within Venezuela's oil industry. Around the time of the article was when Madura handed the reigns of PDVSA to Quevedo. What is the likelihood the corruption just shifted from one group of employees to another (which in this case is the military)?

Venezuela, Guyana and Oil

Venezuela recently sent a naval vessel to disputed waters that are claimed by both Venezuela and Guyana. The naval ship approached an ExxonMobil ship that was doing a seismic survey.

In 2017, the New York Times has an article about the oil being found off the coast of Guyana:

With a population of fewer than one million people, Guyana — Venezuela’s eastern neighbor on the continent’s north coast — would be able to export nearly all of the oil that it will begin producing, probably starting around 2020.  Early rough estimates by experts of how much recoverable oil Guyana could have range to more than four billion barrels, which at today’s prices would be worth more than $200 billion.

As mentioned in the article, oil prices at the time were around $50. One should also note that the population of Guyana is less than one million. This country could end up being the equivalent of Norway. Of course, the problem is that Venezuela holds claims on this area (or at least parts of this area).

Associated Press (22 December 2018) had this to say after the Venezuelan naval vessel approached the ExxonMobil ship:

California State Pension and Stock Market Declines

I've been wondering what the impact of the recent market sell off would have on state pensions. One would assume that pension returns wouldn't drop at the same rate as the stock market as they're diversified across various asset classes. Yet, considering the pensions are of concern, any lower than planned returns will hurt.

Chief Investment Officer has an article up on how California is doing (these returns are prior to the December sell-off).

Baggesen [acting chief investment officer] didn’t given exact investment returns in detailing the low investment numbers to the CalPERS Investment Committee on Dec. 17, but CalPERS data from July 1 through Nov. 30 shows that the system lost overall a 1.9% during the five-month period.

Note that this starts from July 1st through November 30th. Looking at charts, the S&P 500 closed at 2,718 on Friday, June 29th. On Friday, November 30th, the S&P 500 closed at 2,760. So it actually increased during this time frame by 1.5%.

Sweden: Waiting until after Christmas

Per the Seattle Times the Swedes are planning on holding their final two votes for Prime Minister in January. Two votes have failed so far.

Sweden’s parliament speaker says no more attempts at forming a new government will be made this year, after more than three months of political deadlock following elections. Speaker Andreas Norlen says that two more attempts will be made in January before elections must be called under Sweden’s Constitution.

If both attempts fail, a new election will be required.

Bloomberg has more details:

Parliament speaker Andreas Norlen said on Wednesday that he will meet again with party leaders on Jan. 14 and called for a prime minister vote two days later. If that fails, a final and fourth premier vote would then be held on Jan. 23 in a last ditch effort to avoid a new election.

A Re-Look: International Maritime Organization (IMO) - About to Cause and Oil Spike?

OilPrice has an interesting article up on the upcoming January 2020 International Maritime Organization ruling regarding global shipping. The ruling will cut the sulfur content in maritime fuel from 3.5% to 0.5%. It was first announced in 2008 that this would be going into effect. The target date of 2020 was set in 2016.

Though the ruling was set in 2016, it wasn't until recently that economist Philip Verleger raised the red flag about the ramifications of this ruling. He argued that oil prices could hit $200 due to the ruling.

As for the shipping industry, there are three ways to meet the sulfur cuts:

1. Put scrubbers on their ships, which helps reduce the sulfur content.
2. Switch to LNG.
3. Buy lower sulfur content fuel.

Per OilPrice, it appears that the scrubbers option might not be viable:

Sweden: Failed Second Vote for Prime Minister and What's Next?

The Swedes held a second vote for Prime Minister. Per Bloomberg, Social Democratic leader Stefan Löfven failed to win the vote. Prior to the vote, Löfven attempted to pull away two of the parties associated with the Alliance coalition, Centre Party and Liberals. He is associated with Centre-left bloc. That attempt failed. The Alliance stuck together and the far right wing Sweden Democrats also voted against him:

Coalition talks between Lofven and key opposition parties collapsed earlier this week after the Center Party rejected forming a government with the Social Democrats amid disagreements on labor regulations and taxes.

What Bloomberg doesn't state is that Löfven's own block of parties (Centre-left) would probably have splintered if he had been able to work with the two Alliance parties.

Bloomberg had this interesting final paragraph:

Lofven wasn’t even present at the vote since he’s attending a European Union summit. Nationalist leader Jimmie Akesson was also absent, having traveled to Thailand on holiday with his family.

Libya: Wall Street Journal Profiles Khalifa Haftar

As those who follow Libya know, General Khalifa Haftar commands the eastern part of Libya via the Libyan National Army (LNA).

The Wall Street Journal recently did a profile on him. Some interesting comments:

Mr. Haftar’s growing international support was on display at summits in Paris in May and in Palermo, Italy, in November. There, he taunted Libya’s former colonial masters by threatening a boycott and then refused to attend a group dinner with the assembled Libyan and European leaders. Italian officials held a special meeting just for him and a smaller group of visiting leaders.

“Palermo showed that even Italy sees it as strategic to engage with him, and they actually went overboard accommodating his whimsical demands,” said Claudia Gazzini, a senior Libya analyst at International Crisis Group.

California: Pension Editorials

There are a handful of editors that have popped up regarding the topic of California pensions.

Here's one from the Mercury News. Some interesting notes:

Newsom will inherit a staggering $257 billion shortfall in state and school workers’ pension and retiree health care funds . . . So when state Legislative Analyst Mac Taylor gushed earlier this month about the annual state budget being in “remarkably good shape” with a forecast $15 billion surplus for the upcoming 2019-20 fiscal year, we had to question that characterization. The only reason there is a surplus is because Brown kept payments on retirement debt low by irresponsibly stretching them out for decades.

That's an interesting note about the $15 billion surplus. One could call it smoke and mirrors. I'm assuming without stretching out the pension payments, we'd be in a deficit. At least, this is how I read the sentence.

Venezuela: economic collapse leads to environmental pollution

Bloomberg has a short article up about how Venezuela's economic collapse has led to environmental pollution. This pollution is driven by what should be bringing in the most wealth for Venezuela: oil.

PDVSA’s cleanup policy is, on paper, strict, because “if spills aren’t quickly attended to, they become environmental liabilities,” said Carmen Infante, a Caracas-based industry consultant . . . According to workers in the field, many of the services contractors that specialize in sponging up spills, with trucks equipped with giant vacuums, have gone out of business because they’ve had such trouble getting paid by PDVSA.

The reason for this: as the headline states, a lack of investment in their oil industry has led to a breakdown in equipment. It is an indication of how important it is to always invest in continued upkeep, because if you don't the problem eventually explodes. As the article ends with:

Sweden: Moving Closer to Resolution?

As a quick repeat of events: Sweden is currently attempting to form a government due to an inconclusive election. To form a government, a party (or group of parties) needs 175 votes. A minority government can form if other parties allow it by abstaining to vote. As mentioned in prior blogs, there are 2 main blocks of parties: the centre-left and the Alliance. There is also the far-right Sweden Democrats.

There have been some informal attempts to form a government. And one official vote that failed to get Ulf Kristersson of the centre-right Alliance in as Prime Minister. There can only be four official votes before new elections must be held.

And just to list out the major players/facts:

Swedish parliament speaker: Andreas Norlén
Leader of the centre-right Alliance (Moderate party): Ulf Kristersson
Past prime minister though still caretaker of the government (centre-left bloc): Stefan Löfven
Sweden Democrats leader (far right political group): Jimmie Åkesson
Centre Party leader: Annie Lööf
Liberals leader: Jan Björklund

Centre-left bloc parties (144 total seats):

Social Democrats (100 seats)
Left Party (28)
Green Party (16)

Alliance parties (143 total seats):

Moderates (70)
Centre Party (31)
Christian Democrats (22)
Liberals (20)

Sweden Democrats (62)

Okay . . .

With Ulf Kristersson failing to get the needed votes to form an alliance, the job to form a government went to Stefan Löfven, the leader of the centre-left bloc; former Prime Minister, current caretaker Prime Minister.