IT'S WORKING: The Shale Boom Has Given America Tons Of Political Leverage In The Middle East

Many have been skeptical of the true extent of the shale revolution's impact on the U.S. economy, beyond localized effects like lowering mid-continent crude prices and reducing costs for industrial petroleum product manufacturing.

But in a new note, Standard and Poor RatingsDirect's Peter Rigby says it's actually given the U.S. a tremendous amount of political leverage.

Specifically, it can impose sanctions on Iran without the ricochet effect of spiking crude oil prices. 

The Boston Company has made a similar argument — that U.S. crude production may not be causing prices to go down, but has dampened market volatility. 

In a follow-up email to Business Insider, Rigby elaborated on his point: 

...as Iranian supply came off the global market, new US supply was coming on line to contribute to meeting global demand.

So even though US supply, for all practical purposes, does not go onto the global market, it contributes to global supplies. The price is still global, which the US pays, adjusted, of course, for transportation and crude quality differentials.

So, all else being equal, had the embargo gone into effect without that new 1 million barrels per day from the US, there would have been upwards price pressure on crude.

One million barrels is not an insignificant amount, as evidenced by the changing crude oil shipping patterns that are emerging.

Rigby cautioned that the Saudis still hold all the cards.

But it looks like the U.S. is finally getting some leverage.

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A 5-Second Guide To What Traders Are Talking About This Morning

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Bombardier Sells $1 Billion Worth Of Planes To A Private Jet Service

VistaJet

VistaJet has placed a $1 billion order for 20 Bombardier Challenger 350 jets.

Private jet charter company VistaJet has placed an order for 40 Bombardier planes, it announced this morning at the Paris Air Show. The transaction consists of 20 firm orders and 20 options for the Challenger 350, a super midsize jet that can fly eight passengers more than 3,600 miles on a full tank. 

VistaJet buys its own planes and offers seats to its customers for hourly rates, then sells the jets before their warranties are up.

The Challenger order comes on the heels of a much larger purchase in November, when VistaJet placed a firm demand for 56 Bombardier Global jets, worth $3.1 billion. That was the largest single transaction in business aviation history. 

Of the 20 (or 40) new Challengers, 40% will be used to replace older jets VistaJet plans to sell. The rest represent a growth of its fleet, which is currently at 37 planes. Business is very good for VistaJet, founder and chairman Thomas Flohr said in an interview in Paris today.

The private jet market has been weak since 2008, but the fact that fewer people are buying their own planes works to VistaJet's advantage. 

"A lot of people learned the lesson that owning is an airplane is not like owning a car," Flohr said. For people who fly under 400 hours a year, "it makes absolutely no financial sense to own an airplane." That kind of traveler is the ideal VistaJet client.

The company does not disclose many price figures, but a representative told us, "A flight between London and Moscow is roughly equivalent to burning through four Hermes handbags."

According to the Wall Street Journal, a flight costs $15,000 per hour.

The interiors of the VistaJet Challenger 350s will be modeled after the company's Global jets, on a smaller scale. There is a jump seat for the Cabin Hostess, so passengers can enjoy privacy, and the jets will be equipped with Wi-Fi.

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William And Kate's Royal Baby Could Send A $380 Million Jolt Into The British Economy

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The Chart That Eviscerates Five Terrible Talking Points About Taxes

Discussions of tax progressivity tend to have a low ratio of signal to noise. The following chart should clear up a few things.

Business Insider, data from Tax Policy Center and Institute on Taxation and Economic Policy

Here are the big takeaways: Our tax code is highly progressive. Almost everybody pays something. Even the poorest 20 percent of American households (who make on average about $11,000) pay 13 percent of their incomes in tax. The wealthiest 1% pay a rate of 43%, about 3.5 times as much.

Now that you've seen the chart, I have a few instructions:

1. Stop talking about "non-payers" or "the 47 percent" or using any other talking point about how a worrisomely large share of Americans don't pay taxes. Don't call people who don't pay federal income tax "lucky duckies." Almost everybody pays taxes.

2. Stop ignoring state and local taxes. In his paper "Defending the One Percent," Harvard economist Greg Mankiw responds to liberal claims about tax regressivity by citing Congressional Budget Office data showing that, as of 2009, the bottom quintile of earners paid just 1% of their income in federal tax while the top 1% paid 29%. But state and local taxes are modestly regressive, partly offsetting the figure Mankiw cites.

3. Stop fretting about the progressivity of any specific tax. There are good reasons for some taxes to be more progressive than others. Particularly, the federal government is in a better position to levy a highly progressive income tax than states or localities are. If the whole tax system isn't progressive enough, worry about that. Don't fixate on the fact that some component, such as Social Security payroll tax, has a regressive structure.

4. Stop talking about a flat income tax like it were some especially fair and natural thing. Conservatives often talk about flat taxes as being fair because everyone pays the same share of their income. Setting aside whether that's actually fair, it isn't even true; a flat tax on income would combine with other components of the tax code to make our overall system regressive.

5. Stop fixating on Warren Buffett. Buffett likes to talk about how his tax rate is lower than his secretary's. That's misleading. Buffett's tax return doesn't reflect the corporate income tax paid by the companies he owns equities in. Exactly who bears the burden of corporate income tax is a controversial topic, but the most common view is that a majority is borne by owners of capital, while a minority of the tax gets shifted to workers in the form of lower wages. If you distribute the burden of corporate income tax according to that assumption, you find that effective tax rates keep going up as you get into the top 1% and top 0.1%. It is not typical for the ultra-wealthy to pay lower tax rates than the affluent workers under them.

Data for the chart above are drawn from calculations by the Tax Policy Center and the Institute on Taxation and Economic Policy.

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10 Things You Need To Know This Morning

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Why Disney Beats Warner Bros. At Superhero Movies

Marvel

$('.icon-tooltip').tooltip();Looking at the recent popularity and profitability of Disney’s Marvel movie franchises, I’ve frequently wondered why Time Warner, the parent company of DC Comics, has failed to replicate that success with its characters.

Whereas Disney was able to brilliantly weave all of its Marvel movies together into a web that culminated with The Avengers - now the third-highest grossing movie of all time - Time Warner has had mixed results with its biggest comic book franchises.

Although Christopher Nolan’s gritty Batman trilogy generated high returns for Time Warner over the years, its attempt to reintroduce Superman fell flat. Other movies such as Green Lantern, Jonah Hex and Catwoman have been disastrous.

With some of the most recognizable characters in comic book history, why has Time Warner failed to pull all of its biggest characters together into a long-discussed Justice League movie? Why is Time Warner sitting on top of a gold mine but having so much trouble rounding up the miners?

Warner Bros. vs. Buena Vista

In a previous article, I discussed how fast Disney’s media empire is growing compared to Time Warner, which was once the largest media conglomerate on the planet. Last quarter, Time Warner’s Film and TV entertainment division, Warner Bros., reported a 4% decline in revenue to $2.7 billion. Its net income grew 23% to $263 million, roughly 60% of which was attributed to its films. By comparison, Disney’s studio entertainment division posted 13% top line growth to $1.3 billion, which means that its Buena Vista studio is actually larger than Warner Bros.’ movie studio.

In 2011 and 2012, Warner Bros. faced a major problem - two of its core franchises, Harry Potter and The Dark Knight - were coming to an end. At the same time, Disney’s Marvel heroes were united in a series of profitable standalone movies that culminated in The Avengers, which has grossed $1.5 billion to date. Let’s compare the box office revenue of Marvel and DC films over the past few years.

Source: http://www.boxofficemojo.com/

Although Marvel’s returns look impressive, only two of these films were directly produced by Disney’s Buena Vista studios - Iron Man 3 and The Avengers. After Disney acquired Marvel in 2009, Marvel’s prior agreements with Comcast’s Universal and Viacom’s Paramount, which had previously produced its films, eventually ended. Starting with The Avengers, Disney’s Buena Vista took complete control of all of its related franchises. Meanwhile, all of the mentioned DC Comics films were directly produced by Warner Bros.

With sequels on the way for Thor, Captain America and The Avengers, Disney has already signed the majority of its main stars into multi-film deals. Meanwhile, Time Warner’s only big DC Comics release is its Superman reboot, The Man of Steel, which is scheduled to be released this June. Meanwhile, Nolan’s Batman trilogy has concluded, and further possible sequels will not star Christian Bale. Green Lantern, meanwhile, was so poorly received by critics and the audience that any future release will likely be another reboot. Jonah Hex andWatchmen inhabit different parts of the DC Universe altogether, which are not related to Superman or Batman.

A lack of integration is destroying the DC movie universe

The impressive thing about Marvel’s ability to connect its franchises together into a cohesive Marvel movie universe is that it was done with the lack of several of its key franchises. Prior to Marvel’s acquisition by Disney, the movie rights to Spider-Man were sold to Sony’s Columbia Pictures division, while the rights to X-Men, Fantastic Four and Daredevil were all sold toNews Corp.'s 20th Century Fox. In other words, Marvel assembled the Avengers universe, led by Iron Man, with one hand tied behind its back.

Meanwhile, Time Warner has all the movie rights to its main DC characters but seemingly no way to assemble them into a single universe. While Marvel’s films have Samuel L. Jackson’s Nick Fury popping up in different films to recruit the Avengers, Christopher Nolan’s Batmanfilms were not connected in any way to Green Lantern or Superman. In fact, both Nolan’s Batman and the new Superman film, directed by 300 and Watchmen director Zack Snyder, actively attempt to be grittier and more grounded in reality than their campier source material. It’s as if the directors dread the concept of Batman teaming up with Superman or Green Lantern, which occurs frequently in the print comics and cartoons.

Without the willingness to create a film where Batman and Superman team up, representing a merging of the more realistic and more magical sides of the DC universe, then a Justice League film, which could consist of Green Lantern, Wonder Woman, Flash and Aquaman, would be impossible. This has worked before in Warner Bros.’ animated series, but a live action version would be a monstrous undertaking. With Christian Bale and Christopher Nolan out of the picture, a new Batman must be cast, and new films featuring Wonder Woman and the other characters would have to be made.

In other words, if Time Warner wants to replicate Marvel’s success, it has to create an overarching story over multiple franchises with long-term plans to converge them all into a single movie.

Not all is lost yet

If The Man of Steel proves to be successful, then Time Warner shouldn’t simply let the film continue into another self-contained trilogy that eventually concludes with both the main star and director leaving the franchise. It needs to use its sequels to tie together the rest of the DC Universe just as Disney has with The Avengers. With Superman usually being regarded as the leader of the Justice League, then its sequels could open up a whole new exciting universe of comic book films, as dynamically connected as the books on which they are based. If Time Warner is successful, then the returns could be enormous, as seen in this breakdown of Time Warner’s business segments in fiscal 2012.

Source: Time Warner Annual Report

If Time Warner can unveil a full-fledged DC movie universe in the next two or three years, then its Film and TV gains can easily offset any weakness in its lagging Publishing segment. In addition, returns from its Hobbit trilogy should also boost the segment’s top and bottom line growth even more.

Therefore, Time Warner needs to hurry and round up the miners to start digging into its DC Comics goldmine. 

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