Archive - Nov 13, 2014

Today is a 'beautiful day' for U2's front-man Bono as a 'miracle' saved him from what could easily have become 'Wednesday bloody Wednesday' for him and his friends as they flew from Dublin to Berlin. As NBC News reports, Bono had a mid-air scare on Wednesday when the rear door of his private jet plummeted at least 15,000 feet to the ground. The pilots said they noticed a rumble similar to turbulence during a right-hand turn on approach, but that they felt no major change in how the plane was flying even as luggage and door fell to earth... The search for the missing door continues but investigators were overheard saying they 'still hadn't found what they're looking for'.

WTI has now dropped over $2 today with December futures trading below $75 for the first time in over 4 years... "unequivocally good news" right?

Suddenly it is not just the shale companies that are starting to look impaired as a result of tumbling energy prices. According to a Deutsche Bank analysis looking at what the "tipping point" for highly levered companies is in "oil price terms", things start to get really ugly should crude drop another $15 or so per barrell. Its conclusion: "we would expect to see 1/3rd of US energy Bs/CCCs to restructure, which would imply a 15% default rate for overall US HY energy, and a 2.5% contribution to the broad US HY default rate.... A shock of that magnitude could be sufficient to trigger a  broader HY market default cycle, if materialized. "

As Europe gets hungrier and hungrier for a feel-good story, as Brussels longs more and more for a poster child for its 'crisis management' efforts of 2008-2013, as Dublin politicians get closer and closer to facing the crisis-hit electorate, the sunshine being lavished by politicians and the media onto Ireland's economy is likely to get only brighter. It might not feel much warmer, though, on the ground. Nor will it stave off the onset of winter.

While investors are told day after day that low oil prices are "unequivocally" good for America's economy (pick your number $20, $30, $40 billion tax cut for consumers), it appears they are not buying this big lie (that appears to forget the other side of the equation of capex, jobs, and spending from the Shale Oil miracle). As oil prices push to levels where the majority of US Shale plays become non-economic on a half-cycle basis, markets are voting withtheir money and shale-based stocks are pressing to new lows (down 50-70% in the last few months).

No matter the amount and severity of lawsuits, settlements, and bad publicity, it appears, at least in this case, that the act of signing without proper authority or knowledge as to that which one is signing, continues.

Russell 2000 rolls over red...

For centuries, humanity has utilized “colloidal silver” to treat disease and infection, and to prevent disease and infection. Colloidal silver is (primarily) an internal medical treatment, created by immersing particles of silver in a colloidal solution.

A year ago, in the latest attempt to distract from his company's inability to generate profit, Amazon's Jeff Bezos revealed his latest breathless vision for the latest marketing gimmick future in the form of Amazon Prime Air: a fleet of unmanned delivery drones bringing customers the goods they ordered or, as the case may be, didn't order. Immediately in the aftermath of this announcement, a just as breathless ad hoc group of drone hunters was conceived, and patiently waited for the announcement from Bezos where said Prime Air Drones would be tested so they too could test their sharpshooting skills. As of today they are in luck, because as the FT reports, Amazon has picked one of the intellectual capitals of the Old World, UK's university town Cambridge, as the place where it will test its fleet of unmanned delivery drones.

When the head is sick, the whole body is sick...

WTI Crude oil prices tumbled to a $75 handle this morning as Saudi oil minister al-Naimi dismissed claims of a price-war as having "no basis in reality" noting that "Saudi oil policy has remained constant for the past few decades and it has not change today," suggesting expectations of a supply cut at the looming OPEC meetings are overdone. This comment comes after Qatar said it "may" cut output by 500k barrels/day.

While talking heads proclaim - incorrectly - that low oil prices are unequivocally good for the US economy, it is very much not the case for oil producers around the world. Most notably, Venezuela - which 'needs' oil prices above $100 to maintain its socialist utopia - and currently ranks at a lowly 100th on the world's prosperity index, is in grave trouble if this trend continues. Venezuelan bonds plunged to new record lows today as oil prices hit fresh cycle lows, strongly suggesting default or currency devaluation is imminent. However, as is usual (think Mexico) Finance Minister Rodolfo Marco Torres ruled out devaluation even as oil price drop exacerbates country’s finances. As one analyst noted, "there's broad understanding that in the absence of any corrective policy measures that these guys are going to be in serious trouble." It appears they already are. The Maduro government desperately needs a rise in oil prices, but Saudi Arabia has so far rebuffed calls for an emergency meeting as it pursues a strategy of waiting out higher cost competitors. OPEC does not plan on meeting until Nov. 27. That is still an eternity for a country that is beginning to unravel.

While the west is seemingly eager to once again restart the military escalation, if only in rhetoric for now, surrounding the east-Ukraine conflict, leading to a report that the "European Union and the U.S. will weigh further sanctions against Russia’s economy and Ukrainian separatists, after the reported movement of tanks, artillery and combat troops into eastern Ukraine", Russia has chosen to change track completely and give the US a dose of its own cooking, by bringing the military threat next to the borders of the US itself.  "In this situation, we have to maintain a military presence in the western part of the Atlantic and the eastern part of the Arctic Ocean, in the Caribbean and in the Gulf of Mexico"  Russian Defense Minister Shoigu said.

What happens next? Here, straight from the horse's mouth that got the first part of the rapid Yen devaluation so right, is the answer. As Edwards updates with a note from this morning, "the yen is set to follow the US dollar DXY trade-weighted index by crashing through multi-decade resistance - around ¥120. It seems entirely plausible to me that once we break ¥120, we could see a very quick ¥25 move to ¥145, forcing commensurate devaluations across the whole Asian region and sending a tidal wave of deflation westwards."