• Tim Knight from...
    02/06/2016 - 00:25
    What we must remember is this: we are in a bear market, and the risk of a countertrend rally is present, but confined. The opportunity on the downside movement dwarfs the risk of a push higher, as...
  • Phoenix Capital...
    02/06/2016 - 10:15
    2008 was caused by derivatives based on consumer-focused assets (houses). The next crisis will be driven by derivatives on government-focused assets (bonds).

Covenants

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Time Is Running Out For Freeport After Downgrade To Junk And Striking Warning From Moody's





"We believe that the current environment is not a normal cyclical downturn but a fundamental shift in the operating environment for these commodities. As a consequence, a wholesale recalibration of ratings in the mining industry is deemed necessary. " - Moody's

 
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The EU Bail-In Directive: Dark Clouds Are Gathering





In principle, the BRRD, or “bail-in directive” as it is also known, is quite a good idea. The fact that lending money to fractionally reserved banks or even merely depositing it with them, involves risks needed to be firmly reestablished. One simply cannot expect that banks and their creditors will be bailed out by taxpayers at every opportunity. Besides, the admission that there are risks in banking that have hitherto been glossed over or have even been lied about was long overdue. However, Europe’s governments are now likely to find out that the current monetary system with its fractionally reserved banks is actually incompatible with this admission, so to speak.

 
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"Nowhere To Hide" As Baltic 'Fried' Index Careens To Fresh Record Low





Another day, another fresh all-time record low in The Baltic Dry Index as Deutsche Bank's "perfect storm" appears ever closer on the horizon. Plunging 4.7% overnight to 445 points, this is 20% lower than the previous record low in 1986 and as one strategist warns, "It’s a brutal start of the year, there’s just nowhere to hide on the market."

 
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A "Perfect Storm Is Coming" Deutsche Warns As Baltic Dry Falls To New Record Low





Following disappointing China PMI data and a collapse in US ISM Manufacturing imports data, the fact that The Baltic Dry Index has collapsed to fresh record lows will hardly be a surprise to many. However,as Deutsche Bank warns, a "perfect storm" is brewing in the dry bulk industry, as year-end improvements in rates failed to materialize, which indicates a looming surge in bankruptcies.

 
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Market Panics As "China's Warren Buffett" Detained In "Richter Scale 9 Event"





China’s sweeping crackdown on sellers, “manipulators”, frontrunners, financial journalists and anyone else “suspected” of acting in such a way as to sow fear and uncertainty in the wake of the dramatic meltdown in Chinese equities that unfolded over the summer has ensnared money managers, high profile executives, and government officials alike. Earlier this week, it reached a crescendo with the disappearance of Guo Guangchang, known to some as “China’s Warren Buffett. We now have a bit more in the way of color regarding Guo’s detention and sure enough, he’s being “held in connection with an investigation.”

 
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It's Back To The Future As Stocks, Futures Jump On The Latest Abysmal Economic News; China Tremors Return





26 years ago, today was envisioned as day when cars flew, holographic movies were box office hits, hoverboards roamed, and people were fired by fax. None of the happened. Instead the only "back to the future" moment this morning is a deja vu one we have seen every day for the past 7 years: bad economic news leading to surging stocks.

 
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World's Largest Leveraged ETF Halts Orders, Citing "Liquidity Constraints"





First The Bank of Japan destroyed the Japanese bond market, and then, back in May we warned that The Bank of Japan had 'broken' the stock market. Now, it appears the all too obvious consequences of being the sole provider of buying power in an antirely false market are coming home to roost as Nomura reports the "temporary suspension" of new orders for 3 leveraged ETFs - the largest in the world - citing "liquidity of the underlying Nikkei 225 futures market."

 
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As A Shocking $100 Billion In Glencore Debt Emerges, The Next Lehman Has Arrived





And now the real shocker: there is over US$100bn in gross financial exposure to Glencore. From BofA: "We estimate the financial system's exposure to Glencore at over US$100bn, and believe a significant majority is unsecured. The group's strong reputation meant that the buildup of these exposures went largely without comment. However, the recent widening in GLEN debt spreads indicates the exposure is now coming into investor focus."

 
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Glencore Explains What Would Happen If It Is Downgraded To Junk





"In the event of a downgrade by Standard & Poor’s and/or Moody’s from current ratings to the level(s) immediately below...  there are $4.5 billion of bonds outstanding, where a 125bps margin step-up would apply, in the event that the bonds were rated sub-investment grade by either major ratings agency."

 
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Fourth Quarter Begins With Global Stock Rally As Bad Economic News Is Again Good





Good news! Bad news is again great for stocks, and overnight we had just the right amount of bad news from Japan, China and Europe to send stocks surging on the first day of the final quarter.

 
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As SEC Rolls Out Liquidity Risk Plan, Here Are The Bond Funds That May Be Most Vulnerable In A Meltdown





With the SEC moving to head off the risk of a bond market meltdown triggered by a dangerous combination of illiquidity and bond fund proliferation, WSJ decided to see which fund providers are the most at risk in a crisis. The list may surprise you...

 
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"There's Just No Cash" Oil Price Increase Will Not Come Fast Enough To Save Alberta





Bankers and borrowers have kicked the can down the road about as far as they can as more oilfield service (OFS) and exploration and production (E&P) companies default on their loans and seek more relief on lending covenants. While a significant oil price increase to lift all the sinking boats will surely come, it won’t happen soon enough. More of the same won’t work. Oil industry debt is everyday news. But the discussion is about the symptoms, not the ailment.

 
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Glencore Capitulates: Scrambles To Avoid Default By Selling Equity, Dumping Assets, Cutting Dividend





Early this morning Glencore finally capitulated and admitted defeat not only on its expansionary phase (it was just last year Glencore had approached Rio Tinto to engage in a merger), but on its shareholder "friendliness", with a stunning annoucement that it would proceed in a $10 billion debt reduction, issuing $2.5 billion in equity in the form of a rights offering, sell $2 billion worth of assets (such as "proposed precious metals streaming transaction(s) and the minority participation of 3rd party strategic investors in certain of Glencore’s agriculture assets, including infrastructure"), cut working capital by $1.5 billion, cut capex and its loan book by a further $1-$1.8 billion... oh, and it would also scrap its final $1.6 billion dividend as well as next year's interim payout, saving a further $2.4 billion. All this because our "best way to trade China's blow up" was finally picking up steam.

 
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Creditors May Have To Hire Pirates To Seize Oil Ship From "Deadbeat" Ex-Billionaire





"The costs of executing the collateral are very high unless creditors send pirates from Algeria to go and get the vessel."

 
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The Complete Guide To ETF Phantom Liquidity





How the intersection of Fed policy, the post-crisis regulatory regime, and illiquid markets turned ETFs into the new financial weapons of mass destruction.

 
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