Archive - Sep 15, 2015

The party is over for tight oil. Despite brash statements by U.S. producers and misleading analysis by Raymond James, low oil prices are killing tight oil companies. Reports this week from IEA and EIA paint a bleak picture for oil prices as the world production surplus continues. EIA said that U.S. production will fall by 1 million barrels per day over the next year and that, “expected crude oil production declines from May 2015 through mid-2016 are largely attributable to unattractive economic returns.” IEA made the point more strongly. “..the latest price rout could stop US growth in its tracks.”

Seven years ago today, Lehman Brothers failed. But it is what took place just over two weeks prior that is of interest for the scope of this article.

From the moment China closed, The Dow is now up over 300 points... helped by a series of the worst possible data imaginable - confirming the US economy is weak, and getting weaker - which is awesome news!!!

In a dramatic show of faux generosity, staple CNBC commentator and billionaires, Saudi Prince Alwaleed bin Talal who several years ago sued Forbes for "underestimating" his net worth at "only" $20 billion (Forbes won) decided to show the world just how noble (and rich) he is. According to Arabian Business, Alwaleed Philanthropies, chaired by Prince Alwaleed bin Talal, has given out "10,000 housing units and 10,000 cars to Saudi citizens who are eligible as per the criteria set by the organisation."

It is quite likely - given current valuation levels, deterioration in earnings growth, and a slower economic environment - that forward returns will be substantially lower. In other words, the "risk-reward" ratio for being an aggressive investor at this point in the market/economic cycle suggests that the "house will likely win." It is Deja Vu all over again...

2 Year Treasury yields have jumped 4.5bps today, breaking to 77.4bps - the highest since April 2011 as it appears (despite the 30% odds of a rate hike priced into the ED curve) Fed jawboning is creating front-end selling (in the face of weak data). Notably this is the same level that 2Y rates traded at in Dec 2008 after the initial tumble post-Lehman.

Chelsea Clinton is shocked that her mother's poll numbers are falling because after all, Hillary "is always game for singing 'The Wheels on the Bus' to baby Charlotte"...

After years of militarizing the local police in America, California may just have chalked one up for liberty-seekers (though we are not holding our breath). A bill to stop the militarization of California police departments received final approval in the state legislature last Thursday. The bill, which specifically points out the dangers of police militarization, saying it would “declare that this is a matter of statewide concern,”  is now on its way to the desk of Governor Jerry Brown.

I am sad but could not think of a better way...

"If the U.S. and other hostile forces persistently seek their reckless hostile policy towards the DPRK and behave mischievously, the DPRK is fully ready to cope with them with nuclear weapons any time.”

They say that the first casualty of war is truth. And, on both sides of the fight over lifting the ban on exports of U.S. crude oil, the truth has already fallen into a coma. The ban was instituted in 1975 in order to make America less subject to swings in international oil supply after suffering the price shock associated with the Arab oil embargo in 1973. Last week a committee in the U.S. House of Representatives voted to end the ban after a Senate committee voted in July to do the same. A vote by the full House and Senate could be near.

The build up took months... but then the whole mess came crashing down in one weekend. By then it was too late to get your money out...

The tone from investors in the latest Bank of America survey is clear: as Michael Harnett summarizes it, the one prevailing theme is "unambiguous pessimism."  Bottom line: either markets soar, or something bad is about to happen: to wit: "Unambiguous pessimism means risk assets riper for a rally (note investors don’t want a Fed hike this week). If no rally, then markets ominously hinting “recession” and/or “default” imminent." Good luck Janet.