“The few who understand the system will either be so interested in its profits or be so dependent upon its favors that there will be no opposition from that class, while the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”
Just days after the latest two shale casualties filed for bankruptcy protection when both Linn Energy and Penn Virginia announced prepackaged Chapter 11, moments ago Sandridge announced it too was entering bankruptcy court when it filed a voluntarily petition under Chapter 11 in U.S. Bankruptcy Court for Southern District of Texas to consummate a pre-arranged reorganization. This follows just hours after Breitburn Energy Partners announced it had filed Chapter 11 as it hopes to negotiate a restructuring of its balance sheet in court, continuing talks with creditors that began a month ago, CEO Hal Washburn said in a release.
Witness true research that reveals true facts, that unlocks true alpha, aka VALUE! Banco Popular is walking down the same path as Bear Stearns. We should know, we called out Bear in January 2008, and we called out BP months ago.
Overnight Australia finally admitted it has succumbed to the global economic weakness plaguing the rest of the world when in a "surprise" move, Australia’s central bank cut its benchmark interest rate for the first time in a year to a record low and left the door open for further easing to counter a wave of disinflation that’s swept over the developed world. The move sent the local currency tumbling and local stocks climbing. Reserve Bank of Australia Governor Glenn Stevens and his board lowered the cash rate by 25 basis points to 1.75 percent Tuesday, a move predicted by just 12 of 27 economists surveyed by Bloomberg. The announcement has, not surprisingly unleashed havoc across FX markets and broadly pushed global mood into its latest "risk off" phase.
Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”
Moments ago the Fed's RRP operation totaled only $18.7 bln, the lowest level of participation since December 19, 2013 when the maximum bid per counterparty was only $1 bln compared to $30 bid since September 2014. In other words, program participants took only $18.7 billion worth of Treasury securities from the Fed, just months after the Fed expanded the reverse repo program to account for potentially hundreds of billions in reverse repo demand after the Fed's 25 bps rate hike. What is going on? For the answer we looked to repo experts Stone McCarthy, but unfortunately they too are stumped: "We don't have a wonderful explanation for the diminished participation."
It's not just the shale drillers who are in danger as they see their liquidity evaporate. As the WSJ writes today, and as covered here since January, it is the lenders themselves whose unfunded revolver exposure may suddenly become funded and expose them to even greater risks from the energy sector should oil not rebound far more forcefully and put US oil and gas companies back in the black. How big is the exposure? Very big: $147 billion.
I called it once in January 2008 (Bear). I called it 2x in March 2008 (Lehman), and I'm calling it again in 2016. Don't say you didn't know. These proclamations of trust will truly put my analysis - and your capital - to the test.
Putting trust in an entity does not mean that you can trust that entity. Ask the former clients of Bernie Madoff, Lehman Brothers, Bear Stearns and Man Financial - among many others. Despite these very recent historical examples of misplaced trust consequences, here we go again!
An afternoon sell-off in GC pushed overnight rates (on quarter-end) as high as 1.75% and the market ended closed at 1.75%. Drumroll please! The 1.75% rate was the highest GC Repo trade since September, 2008.