Private Equity

With oil prices pushing cycle lows and Shale firms as loaded with debt as they have ever been, the spike in energy sector credit risk should come as no surprise as the hopes of the last few months are destroyed. At 1076bps, credit risk for the energy sector has never been higher. As UBS recently warned, more defaults are looming and, as we discussed this week, private equity is waiting to pick up the heavily discounted pieces.

• China stocks slump 6 percent on fears of further yuan depreciation (Reuters)
• U.S. Lacks Ammo for Next Economic Crisis (Hilsenrath)
• Emerging Markets Extend Slide as Commodities Fall; Pound Jumps (BBG)
• China yuan to move both ways, more 'adjustments' unlikely: central bank economist (Reuters)
• Playing Chinese markets is as simple as 'follow the leader' (Reuters)
• PBOC Injection Shows China Worries About Outflows (WSJ)
• Russia Fails to Soothe Oil Concerns as Citi Joins Ruble Bears (BBG)

PBoC Injection Shows China Worries About Outflows- WSJ

Is Saudi Arabia on the verge of winning the war on US Shale firms? It appears the spigot of malinvestment-subsidizing liquidity that kept numerous zombie energy firms alive has been shut off almost entirely. As oil prices return to cycle lows, so credit risk has spiked to record highs and issuance of life-giving bonds has collapsed. As Reuters reports, this has opened up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks' slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow. But hope is fading as one private equity form CEO warns "I would say, this is a good time to be careful when it comes to investing in energy."

• Oil moves nearer six-year low on Japan data, oversupply (Reuters)
• Commodity Slide Spurs Treasuries as Emerging Markets Extend Drop (BBG)
• Because 7 years is "just right" - BOE Official Says Don’t Wait Too Long on Rates (WSJ)
• How Medicare Rewards Copious Nursing-Home Therapy (WSJ)
• Millennials Are Developing Parents’ Taste for Jaguars, Cadillacs (BBG) ... and even more debt
• Mexican Billionaire’s Firms Swept Up in U.S. Probe of Citigroup (BBG)

The Telegraph’s John Ficenec has written an excellent piece warning of a possible market crash in the coming weeks. He identifies eight key “signs things could get a whole lot worse.”  

“Maybe this isn’t a great indication of the state of the economy.”

Asset price inflation, a disease whose source always lies in monetary disorder, is not a new affliction. It was virtually inevitable that the present wild experimentation by the Federal Reserve - joined by the Bank of Japan and ECB - would produce a severe outbreak. And indications from the markets are that the disease is in a late phase, though still short of the final deadly stage characterized by pervasive falls in asset markets, sometimes financial panic, and the onset of recession.

• China central bank under pressure to weaken yuan further (Reuters)
• Currency Rout Goes Global as Jen Sees Risk of 50% Loss on China (BBG)
• Europe Stocks Fall Most in Two Weeks as China Sparks Growth Fear (BBG)
• German Yields Drop to Record as China Boosts Bonds Around World (BBG)
• FT to Japan, Economist to Italy: Agnelli Family Raises Stake in Economist as Pearson Exits (BBG)
• Goldman Sachs to Give Out ‘Secret Sauce’ on Trading (WSJ)
• Greece's Preliminary Bailout Deal Faces German Turbulence (BBG)

• Grim China data keeps stimulus hopes alive (Reuters)
• Berkshire Hathaway to Buy Precision Castparts for About $37 Billion (BBG)
• Greece, lenders in final push to seal new bailout (Reuters)
• Quantitative Easing With Chinese Characteristics Takes Shape (BBG)
• Greece nears €86bn accord with creditors (FT)
• Oil Futures Signal Weak Prices Could Last Years (WSJ)
• Drop in long-term investment hinders eurozone recovery (FT)
• Two shot in Ferguson amid standoff between police, protesters (Reuters)

• July job gains may favor September interest rate rise (Reuters)
• It's all about Trump at raucous Republican debate (Reuters)
• The 5 Most Important Takeaways From the First Debate of 2016 (BBG)
• Republican presidential candidate Carly Fiorina wins the Web (Reuters)
• Hedge Fund Losses From Commodity Slump Sparking Investor Exodus (BBG)
• Winners and losers from the first Republican presidential debate (WaPo)
• Bush turns in workmanlike debate performance, but will it be enough? (Reuters)

• Turkey says coalition to launch 'comprehensive battle' against Islamic State (Reuters)
• Buffett’s Celebration Tempered by 50th Anniversary Stock Slump (BBG)
• SEC Set to Approve CEO Pay-Gap Disclosure Rule (WSJ)
• Greece wants full bailout, not bridge loan, ruling party says  (Reuters)
• Stocks Rise Fueled by Strong European Corporate Earnings and Chinese Data (WSJ)
• JPMorgan Reclaims Place Among U.S.'s Top 10 Biggest Stocks (BBG)
• Eurozone retail sales fall sharply in June (MW)

The American system of government is nothing like what we are told in school and via the oligarch-owned mainstream media. The country has become so captured and corrupted by sociopathic oligarchs, that a neo-feudal modern serfdom is emerging where the opportunities to enjoy rising standards of living for the vast majority of people was rapidly becoming a pipe dream. The Dark Ages almost look democratic by comparison.

We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history. Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder…

After a slow first quarter of 2015, the private equity industry experienced a revitalization in Q2-2015. Investment dipped by less than 1 percent to $112 billion, holding strong at the second highest Q2 level since 2007, fundraising fell to $30 billion. . Meanwhile, as ValueWalk details, exit volume exploded last quarter to $125 billion - the highest level on record - raising the question: "if everything is so awesome, why the smartest people in the room selling to the public at the heaviest pace ever?"