"There is excessive debt everywhere and negative interest rates are dangerous... My number one fear? That’s the same as asking me where it will start. When you view the economy as a complex, adaptive system, like many other systems, one of the clear findings from the literature is that the trigger doesn’t matter; it’s the system that’s unstable. And I think our system is unstable... Central Bank models are just wrong"
When the economy collapses, it will collapse down to a lower sustainable level. Much of the world’s infrastructure was built when oil could be extracted for $20 per barrel. That time is long gone. So, it looks like the world will need to collapse back to a level before fossil fuels - perhaps much before fossil fuels.
"The Fed doesn't have a clue!" - We allege that not only because the Fed appears to admit as much, but also because our own analysis leads to no other conclusion. With Fed communication in what we believe is disarray, we expect the market to continue to cascade lower - think what happened in 2000. To understand what's unfolding we need to understand how the Fed is looking at the markets, and how the markets are looking at the Fed.
Yes, Chesapeake will default, but the question is when. For those who think the company will somehow survive for a more than a month without filing Chapter 11 or arranging some prepackaged bankruptcy, and actually repays the $500 million issue, this could be the trade that makes someone's full year.
"People [are] saying that we can't make a go of it and mail the keys to the bank. In the big cities, not so much because the average sale prices haven't really dropped much, we haven't seen the pain yet. But Calgary is getting pretty tight."
S&P Downgrades Banks With Highest Energy Exposure; Expects "Sharp Increase" In Non-Performing AssetsSubmitted by Tyler Durden on 02/09/2016 17:35 -0500
Moments ago S&P continued its downgrade cycle, this time taking the axe to the regional banks with the highest energy exposure due to "expectations for higher loan losses." Specifically, its lowered its long-term issuer credit ratings on four U.S. regional banks by one notch: BOK Financial Corp., Comerica Inc., Cullen/Frost Bankers Inc., and Texas Capital Bancshares. The outlooks on these banks are negative.
Let me be blunt: this next crash will be far worse and more dramatic than any that has come before. Literally, the world has never seen anything like the situation we collectively find ourselves in today. The so-called Great Depression happened for purely monetary reasons. Before, during and after the Great Depression, abundant resources, spare capacity and willing workers existed in sufficient quantities to get things moving along smartly again once the financial system had been reset. This time there’s something different in the story line...
"You can tell them that Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position. On Monday, we took advantage of this strength to reassure the market of our capacity and commitment to pay coupons to investors who hold our Additional Tier 1 capital. This type of instrument has been the subject of recent market concern."
Or, said otherwise, "Deutsche Bank is fine." And the selling has resumed...
Many readers would consider this a simple question and perhaps even an obsolete one.
In any other case debt/EBITDA at or higher than 10x - certainly 15x - in a world in which cash flows are rapidly deteriorating would be an excuse for bondholders to take to the hills. But when you have such leverage ratios as 83x one can only quietly stand back, find a place behind which to hide, and hunker down ahead of the coming explosion.
In the USA, that economy has bled out like a hapless bystander with a sucking chest wound for the last eight years. Despite all the patriotic sanctimony on view at the Superbowl, the nation appears to be visibly cracking up, along with the fantasy of a permanent global economy. None of the desperate work-arounds since 2008 have worked around the predicaments of our time.
The saga of the gas giant Aubrey McClendon's built, Chesapeake Energy, enters its endgame, when moments ago following a Debtwire report that the company has hired Kirkland and Ellis as its restructuring/bankruptcy attorney - typically a step taken just weeks ahead of a formal Chapter 11 filing - the stock has plunged 22% to $2.40, the lowest price in the 21st century, and for all intents and purposes, ever.
Wow, did the dollar move down this week! It dropped more than it has in quite a while. It fell 1.3mg gold, or 0.1g silver, but what happened to the fundamentals?
Venezuela's central bank has begun negotiations with the suddenly troubled Deutsche Bank to carry out gold swaps "to improve the liquidity of its foreign reserves as it faces heavy debt payments this year", payments which it won't be able to fund unless it manages to "liquify" its gold. "One of the sources said the central bank has taken an unspecified amount of gold out of the country so that it can be certified, which is required for gold that is used in such swaps."
Meltdown-Mode: European banking stocks are imploding, CDS spreads are exploding.