History may not repeat but it rhymes so loud sometimes that Einstein would be rolling in his repetitively insane grave. As Bloomberg notes, the last time that U.S. oil drillers got caught up in a price war orchestrated by Saudi Arabia, it ended badly for the Americans. "1986 was the big price collapse and the industry did not see it coming,” said Michael Lynch, president of Strategic Energy and Economic Research who has covered the oil sector for 37 years, "it put a lot of them out of business. You just don’t forget it. It’s part of the cultural memory." Think it can't happen again? Think again... consider how levered US Shale drillers are and just what Saudi has to gain from keeping their foot on the US neck... In 1986, the U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market.
"The time to liquidate a given position is now seven times as long as in 2008, reflecting much smaller trade sizes in fixed income markets. In part the current liquidity illusion is a product of the risk asymmetries implied by the zero lower bound on interest rates, excess reserves in the system, and perceived central bank reaction functions. However, interest rates in advanced economies won’t remain this low forever. Once the process of normalization begins, or perhaps if market perceptions shift, and it is expected to begin, a re-pricing can be expected. The orderliness of that transition is an open question."
The Vendetta Continues: Ackman's Latest Herbalife Deathwish And Other Observations - The Full Q3 LetterSubmitted by Tyler Durden on 11/26/2014 - 13:07
For those who care what Bill Ackman has been thinking and doing lately, aside from colluding with and piggybacking on desperate for M&A "strategics" to go activist, and buying a boatload of calls in advance of announcing a material, market-moving position and in the process generating a 43.4% YTD return while the SEC sits on its hands doing nothing and proving once again the market is a rigged playground catering to billionaires, here is his full Q3 letter.
As of 1220ET, 505 flights have been cancelled in the US today (and 1,731 additional flights are subject to delays) as airlines both pre-emptively and reactively prepare for the worst case nor'easter due to hit the East Coast any hour now. Chicago O'Hare is subject to the most flight delays, followed by New York's JFK. Newark, Laguardia, and Philadeplhia airports are seeing the most cancellations currently. "In most cases, the worst time to travel in the mid-Atlantic and New England due to the storm will be on Wednesday and Wednesday night."
The last time the world's largest oil and gas drill operator, Seadrill, halted its dividend payment was in 2009, shortly after Lehman had filed and the world was engulfed in a massive depression. Retrospectively, this made sense: the company was struggling not only with depressionary oil prices, but with a legacy epic debt load as can be seen on the chart below. So the fact that the stock of Seadrill collapsed by 20% today following a shocking overnight announcement that it had once again halted its dividend despite what is a far lower debt load than last time, indicates that when it comes to energy companies, the current global economic "recovery" - if one believes the rigged US stock market - is actually worse than the Lehman collapse.
It really isn’t hard to connect the dots and see the real economy in the real world, outside Wall Street, is a disaster and getting worse by the hour. Below are a bunch of dots that have been issued in the last 24 hours. Here are the facts.
After describing this week's prior two bond auctions as "blistering" and "scorching", we were concerned we would run out of hyperbolic adjectives to describe today's last for the week 7 year auction. As it turns out, our concerns were unfounded, because moments ago the Treasury announced it sold $29 billion in 7 Year paper at a 1.96% yield, a small 0.4 bps tail to the When Issued in an auction that was just modestly weaker than the prior two, relatively speaking, even if in absolute terms the high yield, down from 2.02% last month, was still the lowest since October 2013, and as can be seen on the chart below, is continuing to drop. The Bid to Cover also showed a substantial pick up in interest, jumping to 2.635, the highest since February, and well above the 2.54 TTM average.
In order to "suggest" that the US economy had grown by a far greater than expected run-rate, the BEA was forced to revise away personal income, and "assume" these had instead been invested in the US economy, in the form of a surge of durable goods purchases. Sure enough, while both incomes and savings tumbled, spending magically surged: So if that "statistical" amount of money you thought you had saved in the BEA's savings.xls spreadsheet just dropped by 10%, fear not dear Americans: it was all used for a good cause: to fabricate a much stronger than expected Q3 GDP number.
Moments ago the Census Bureau reported that 458K new homes were sold in October (with a 16.5 error confidence), which missed expectations of a 471K increase from last month's 467K print, but that's ok, because last month's number was also revised substantially lower from 467K to 453K, which in turn will allow the mainstream propaganda to tout that New Home Sales jump in October to match the highest print since October 2013. There is one problem: here is what the update chart of New Home Sales data looks like on a historical basis... and as revised. It sure puts that 458K "increase" in a slightly different light.
Following the Conference Board's tumble in confidence, Bloomberg's consumer comfort index surged this morning (rather aberrationally) to highs not seen since 2007. However, while UMich consumer confidence rose from last month to its highest since July 2007, it missed expectations by the most since October 2013. It would seem the survey respondents in UMich and Bloomberg confidence are stockholders, and Conference Board respondents are not... UMich data is dominated by a surge in current conditions with the outlook flat.
Having surged to last October's highs last month, Chicago PMI tumbled back to mediocrity in November, missing extrapolatedly exuberant expecatations by the most since July. As 60.8 (against 63.0 expectations) this is barely above the levels of Q1's polar vortex as New Orders, Employment, and Production all fell (with only 2 components rising). This is the 4th largest MoM drop since Lehman but MNI remains confident that "the trend remains positive..."
All the blather about "growth" and GDP is just propaganda to misdirect our attention from the real problem: the total domination of governance and finance by a class of vested interests and mega-wealthy cartels/oligarchies.
If yesterday the BEA provided the sugar high for Q3, with a GDP number that will be soon revised lower, then today's economic barage has so far been a disaster, with both Initial Claims, Personal Income and Spending, and now core Durable goods and capital goods shipments and orders missing across the board.