Bottom line, our conversations with investors suggest yields in the 20 – 25% context could be attractive enough to draw in marginal capital – although several investors noted that is reasonable for triple C risk excluding commodities. In short, we're not there yet.
"Look, the OPEC thing may turn out to be bogus. Lord knows we’ve heard that line too many times to count, and oil’s at $26/barrel."
"...gold at $1,200 an ounce, what does that tell you? It tells you that in a flight to quality, in a safe haven, people have more confidence in gold than in bank deposits or paper money. I think things have gotten out of control."
- Bob Michele, Global CIO & Head, Global Fixed Income, Currency & Commodities Group"
Seconds after Oil hit the lows and NYMEX closed - and S&P broke the critical 1812 level, this hit:
*OPEC READY TO COOPERATE ON CUT, UAE ENERGY MIN SAYS: WSJ
So, first it was Venezuela speaking for the Saudis, then it was Russia speaking for the Saudis, now it is the UAE.
“We’re surprised that the Europeans should say we should open the borders to Syrians from Aleppo when we’ve been doing that for five years. It is all unfolding, another tsunami. How are we going to cope?”
An OPEC production cut is unlikely until U.S. production declines by about another million barrels per day (mmbpd). OPEC won’t cut because it would accomplish nothing beyond a short-term increase in price. Carefully placed comments by OPEC and Russian oil ministers about the possibility of production cuts achieve almost the same price increase as an actual cut. The focus going forward must be on the source of the problem. That is the United States and not OPEC.
Remember it was the BOJ that stepped in October of 2014 at 1970, and again in October of 2015 at 1970 again. The Japanese bought Yellen a year of time, and gave her a market of 2070 to hike rates. Now that the market has fallen back to the August low, it is the BOJ who has turned their monetary policy to negative rates. What does this tell the market? That after attempting to pump it twice above 1970, with the market at 1870 they have switched to negative rates. Sign of desperation? So far the market is not buying it.
It appears by the total lack of coverage that the utter collapse of Europe's banking system is entirely irrelevant to the "fortress-like" balance sheets of US banks... but it is not. Once again today, US financials saw bonds dumped across the senior and subordinated segments and while US financial stocks have fallen hard year-to-date, if credit is right - and it usually is on a cyclical basis - US bank stocks have a long way to go (as believe in book values is battered).
After yesterday's strong 10Y auction few were expecting ugliness in today's final for this week 30Y issuance: after all with markets crashing, the flight to safety and duration surely would mean strong demand for the long-end of the curve. Only that wasn't the case.
"We had previously considered them and decided that they would not work well to foster accommodation back in 2010. In light of the experience of European countries and others that have gone to negative rates, we’re taking a look at them again because we would want to be prepared in the event that we needed to add accommodation."
The key take-away: focus on owning income-producing assets, not a primary residence. Don't finance your assets with debt; finance your income-producing assets with savings and sweat equity, not borrowed money.
“This would mean a regional war. Mistakes can’t be tolerated, especially with the tension mounting around the region. It’s not about Iranians, but about all troops on the ground fighting with the Syrian army. How would the Syrian army deal with a foreign country on its soil, without its permission, and maybe aiming [guns] at them?"
Speculators are now "making the leap to Cushing storage never being more full... will actually overfill, or even stop taking crude oil deliveries outright..."
“Given the current environment in the oil and gas market and the poor outlook for future fundamentals in the short to medium term, BNP Paribas has had to make adjustments to some of its businesses and has decided to stop the redevelopment of its reserve-based lending business."