With Europe back from Easter break, we are seeing a modest continuation of the dollar strength witnessed every day last week, which in turn is pressuring oil and the commodity complex, and leading to some selling in US equity futures (down 0.2% to 2024) ahead of today's main event which is Janet Yellen's speech as the Economic Club of New York at 12:20pm, an event which judging by risk assets so far is expected to be far more hawkish than dovish: after all the S&P 500 is north of 2,000 for now.
The companies most at risk may actually be those with that currently have some of the most highly utilized borrowing bases, ranging anywhere from 62% for Contango to 94% for Vanguard. It is these companies that will suddenly find themselves with zero incremental sources of liquidity as the banks proceed to whack anywhere from 30 to 50% of their borrowing base, leaving them scrambling to preserve liquidity and ultimately leading to bankruptcy court
Headlines will crow of the seasonally-adjusted 'beat' of expectations for the Dallas Fed survey (-13.6 vs -25.8 exp) but this is the 15th month in contraction (below 0) - something only seen in recession. Scratching below the surface we see employees, workweek, and capex all in contraction and forward expectations for new orders and employment tumbled. Perhaps that reality is what drove one respondent to rage, "anyone who says the economy is not in recession is peddling fiction."
With European markets closed across the continent on Monday as the Easter holiday continues, overnight Asia was busy with China Shanghai Composite letting off some steam, and closing down 0.7% at session lows on concerns the Shanghai and Shenzhen home bubble have been popped by the politburo, Japan was a different story with the Yen sliding following a report by the Sankei newspaper that Abe will announce in May his intention to delay the planned levy hike, coupled with additional reports that Japan will unveil a major fiscal stimulus (and just on Friday Abe said he is "not thinking at all about supplemental budget" at this time).
It’s sad that “we the people” continue to allow deranged captured academics, under the complete command of the banking cabal, to control the destiny of our country. They have failed for 103 years, but we continue to bow down to these central bankers as if they knew what they were doing. They do know how to debase the currency, obfuscate true inflation, prop up financial markets through monetary manipulation, and generate prodigious amounts of propaganda and misinformation to coverup their true purposes. The people will sit idly by until these deranged rats destroy the world.
Slowly but surely Canadian oil and gas failures are starting to become a daily reality; failures such as that of Canadian junior oil and gas producer Terra Energy Corp which yesterday said it shut down production, ceased operations and announced the resignation of directors and officers on Monday, after its lender, Canadian Western Bank, demanded full repayment of its debt.
Soon After We Sounded The Alarm, Canada's Regulator Warns Local Banks Are Underreserved To Energy LossesSubmitted by Tyler Durden on 03/21/2016 21:56 -0400
Two months after we first suggested that Canadian lenders are woefully underreserved to future oil and gas loan losses, we are happy to announce that Canada's regulator has heard our warning, and as the WSJ reported, "Canada’s banking regulator is urging the country’s major banks to review their accounting practices to ensure they have sufficient reserves as the commodity-price collapse takes a toll on the economy."
To now dismiss Fed policy causation as “correlation theory” is laughable. The markets are now so intertwined and Fed dependent the observation of whether correlation is causality has been rendered moot. Without the Fed – there is no market. That’s now a proven fact. Period.
At this point, one wonders why any central banker would chase down the NIRP rabbit hole only to find themselves the protagonist in the latest retelling of "Krugman in Wonderland," but alas, the experiment continues. The only question now is this: will the FOMC take the plunge? Here's a chronological list of Fed NIRP commentary.
The Liquidity Endgame Begins: Whiting's Revolver Cut By $1.2 Billion As Banks Start Slashing Credit LinesSubmitted by Tyler Durden on 03/14/2016 21:03 -0400
Whiting, the largest oil producer in North Dakota's Bakken shale formation, had $2.7 billion left on a loan revolver at the end of 2015. Its CEO Volcker said on Thursday he expects Whiting will have "at least $1.5 billion" left on the loan after the redetermination, implying a cut of $1.2 billion. What is most troubling is that as recently as late February, or just a few weeks ago, the company said it expected a cut of no more than 30%, which would have been roughly $800 million.
While the recent Weatherford example was indeed grotesque and extreme in its inherent conflicts of interest, some readers wondered if this was perhaps an isolated case. The answer: a resounding no: as the following table shows, the vast majority of new equity proceeds have been used almost entirely to pay down revolvers and existing debt, and to allow banks to reduce their exposure to these oil and gas companies.
"JP Morgan is raising equity in a company with questionable prospects and using the funds to repay debt the company owes JP Morgan. The arrangement allows JP Morgan to get its money out prior to lenders subordinated to it get their $401 million payment."
"I’m very sad that I have to close my store." Tell it to King Salman.
With markets happy to put February in the history books because it marked the fourth consecutive monthly decline in global stocks, we move on to March 1st, which doubles down as 'Super Tuesday' in the US when Trump's presidential candidacy will almost certainly be sealed and a day in which stocks decided to join the super fun by super surging overnight on nothing but bad global macro and economic which however was promptly ignored and instead the focus was on ongoing central bank intervention and even more jawboning.