Has The Crash of 2016 Now Begun?

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Re: Has The Crash of 2016 Now Begun?

Postby seemslikeadream » Thu Jan 14, 2016 10:35 pm

nothing like a little Keiser to cheer you up

Mazars and Deutsche Bank could have ended this nightmare before it started.
They could still get him out of office.
But instead, they want mass death.
Don’t forget that.
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Re: Has The Crash of 2016 Now Begun?

Postby seemslikeadream » Fri Jan 15, 2016 9:37 am

JANUARY 15, 2016
The Chart That Explains Everything
by MIKE WHITNEY


Why is the economy barely growing after seven years of zero rates and easy money? Why are wages and incomes sagging when stock and bond prices have gone through the roof? Why are stocks experiencing such extreme volatility when the Fed increased rates by a mere quarter of a percent?

It’s the policy, stupid. And here’s the chart that explains exactly what the policy is.
Image
(Richard Koo: The ‘struggle between markets and central banks has only just begun’, Business Insider)

What the chart shows is that the vast increase in the monetary base didn’t impact lending or trigger the credit expansion the Fed had predicted. In other words, the Fed’s madcap pump-priming experiment (aka– QE) failed to stimulate growth or put the economy back on the path to recovery. For all practical purposes, the policy was a flop.

QE did, however, touch off an unprecedented 6-year bull market rally that pushed stocks into the stratosphere while the real economy continued to languish in a long-term slump. And the numbers are pretty impressive too. For example, the Dow Jones Industrial Average, which bottomed at 6,507 on March 9, 2009, soared to an eye-popping 18,312 points by May 19, 2015, an 11,805 point-surge in just five years. And the S&P did even better. From its March 9, 2009 bottom of 676 points, the index skyrocketed to a record-high 2,130 points on May 21, 2015, tripling its value at the fastest pace in history.

What the chart shows is that the Fed knew from 2010-on that stuffing the banks with excess reserves was neither lowering unemployment or revving up the economy. The liquidity was merely driving stocks higher.

It’s worth noting, that the Fed knows that credit does not flow into the economy without a transmission mechanism, that is, unless creditworthy borrowers are willing to to take out loans. Absent additional lending, the liquidity remains stuck in the financial system where it eventually creates asset bubbles. And that’s exactly what’s happened. Instead of trickling down into the economy where it would do some good, the Fed’s monetary stimulus has cleared the way for another catastrophic meltdown.

The chart suggests that the Fed’s primary objective was to reflate stock and bond prices to help the banks grow their way out of insolvency and avoid government takeover. Former Treasury Secretary Timothy Geithner alluded to this in an interview with CNBC in 2009 when he said: “We have a financial system that is run by private shareholders, managed by private institutions, and we’re going to do our best to preserve that system.” Unfortunately, the banking system was insolvent at that point in time, a fact that was confirmed in sworn testimony before the Financial Crisis Inquiry Commission by Fed chairman Ben Bernanke. Here’s what he said:

“As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression. If you look at the firms that came under pressure in that period. . . only one . . . was not at serious risk of failure. So out of maybe the 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.”

Think about that for a minute. Not only was the US banking system hopelessly underwater, but also the world’s most lucrative and powerful industry was about to be removed from private hands and “nationalized”. Shareholders would be wiped out, bondholders would take severe haircuts, management would be replaced, and credit production would be returned to the representatives of the American people, US government officials.

Do you think the prospect of nationalization might have scared the hell out of Wall Street? Do you think the banksters might have concocted some crazy plan along with Bernanke and Treasury Secretary Henry Paulson to precipitate a crisis by euthanizing Lehman Brothers so they could extort $700 billion from Congress (TARP) before launching round after round of money printing under the deliberately-opaque moniker, Quantitative Easing?

Of course, they would. These are the same guys who had already stolen trillions of dollars from credulous investors in a fraudulent mortgage laundering scam that crashed the economy and brought the financial system to the brink of ruin. Does anyone seriously think that they’d wince at the prospect of dinging the public a second time by shifting their toxic assets onto the Fed’s balance sheet or by accessing free liquidity to fuel their illicit derivatives trades or their other pernicious high-risk activities?

Keep in mind, the Fed never could have carried off this massive looting operation without the help of both the Congress and the president. This simple fact seems to escape even the most vehement critic of the Fed, that is, that the Fed needed policymakers to strangle the economy while it implemented its plan or it would have had to abandon its reflation strategy.

Why??

Well, because if the economy was allowed to rebound, then higher employment would push up wages and raw material costs which in turn would boost inflation. Higher inflation would force the Fed to raise short-term interest rates which would put the kibosh on the cheap money Wall Street needed to buy-back its own shares or engage in other risky speculation. So the real economy had to be sacrificed for Wall Street. Hence, “austerity”.

The fact that Obama’s economics team, led by Lawrence Summers, was trying to lift the economy out of recession without creating conditions for a strong recovery was evident from the very beginning. We know now that chief White House economist Christy Romer wanted a much bigger fiscal stimulus package than the $800 bil that was eventually approved. Here’s the story from the New Republic:

“Romer calculated that it would take an eye-popping $1.7-to-$1.8 trillion to fill the entire hole in the economy—the “output gap,” in economist-speak. “An ambitious goal would be to eliminate the output gap by 2011–Q1 [the first quarter of 2011], returning the economy to full employment by that date,” she wrote. “To achieve that magnitude of effective stimulus using a feasible combination of spending, taxes and transfers to states and localities would require package costing about $1.8 trillion over two years.”
(EXCLUSIVE: The Memo that Larry Summers Didn’t Want Obama to See, New Republic)

EXCLUSIVE: The Memo that Larry Summers Didn’t Want Obama to See
BY NOAM SCHEIBER
February 21, 2012

For the past three years, Washington journalists and politicos have obsessed over a 57-page memo that Barack Obama’s incoming economic team prepared for him in late 2008. The document has achieved such totemic status for good reason: It decisively shaped the Obama administration’s initial response to the economic crisis. The memo outlined the president-elect’s options for dealing with the teetering banks, the cash-strapped automakers, and the country’s tidal wave of foreclosures. Above all, the memo laid out options for a massive stimulus package—the mix of tax cuts and government spending designed to end the recession and boost employment. The economic team presented the contents of the memo to Obama at his transition headquarters on December 16, 2008, at which point they collectively settled on a proposed stimulus of nearly $800 billion.

Last month, my friend and former colleague, Ryan Lizza, wrote a much-discussed piece in The New Yorker based on a copy of this and several other previously-unpublished memos. The piece and the corresponding memo described the stimulus options that Obama’s team—including Larry Summers, his top economic adviser, and Christy Romer, soon to be his chief White House economist—ultimately sent him. The options ranged from about $550 billion to just under $900 billion.

Read Scheiber's article, "Obama's Worst Year: The Inside Story of his Brush with Political Disaster" from the March 15, 2012, issue.

Intriguingly, Lizza also noted that Romer “was frustrated that she wasn’t allowed to present an even larger option,” suggesting that while the memo he obtained may have been the end of the story, it was far from the whole story.

Now, based on reporting I’ve done for my forthcoming book on the Obama administration, I can fill in a major gap in the narrative—an earlier version of the same memo that includes Romer’s larger option. (A source provided the memo on the condition that he not be named.) In this version of the memo, Romer calculated that it would take an eye-popping $1.7-to-$1.8 trillion to fill the entire hole in the economy—the “output gap,” in economist-speak. “An ambitious goal would be to eliminate the output gap by 2011–Q1 [the first quarter of 2011], returning the economy to full employment by that date,” she wrote. “To achieve that magnitude of effective stimulus using a feasible combination of spending, taxes and transfers to states and localities would require package costing about $1.8 trillion over two years.” Alas, these words never made it into the memo the president saw.

By clicking on the graphic below, you can examine the relevant section of Romer’s version of the memo alongside the final version that Lizza recently published. What’s striking is that the two versions are very similar, except that the paragraph in which Romer makes the case for $1.7-to-$1.8 trillion has simply vanished.

Image

[Note: To view the Romer version of the memo in its entirety, please click here.]

What happened? When Romer showed Summers her $1.7-to-$1.8 trillion figure late the week before the memo was due, he dismissed it as impractical. So Romer spent the next day or two coming up with a reasonable compromise: $1.2 trillion. In a revised document that she sent Summers over the weekend, she included the $1.2 trillion figure, along with two more limited options: about $600 billion and about $850 billion.

At first, Summers gave her every indication that all three figures would appear in the memo he was sending the president-elect. But with less than twenty-four hours before the memo needed to be in Obama’s hands, Summers informed her that he was inclined to strike the $1.2 trillion figure. Though Summers, like Romer, believed more stimulus was almost unambiguously better, he also felt that a $1.2 trillion proposal, to say nothing of $1.8 trillion, would be dead on arrival in Congress. Moreover, since Obama’s political operatives were convinced that any stimulus approaching a trillion dollars was hopeless, Summers worried that urging more than this amount would stamp him and Romer as oblivious in their eyes. “$1.2 trillion is nonplanetary,” he told Romer, invoking a Summers-ism for “ludicrous.” “People will think we don’t get it.”

Romer was uneasy with this. She felt that $1.2 trillion was itself a pragmatic middle ground. She also believed the president-elect should deeply grasp all the trade-offs he faced, and in this she wasn’t alone. Peter Orszag, the incoming budget director, agreed in retrospect that the figure should have been included in Obama’s memo even though Orszag personally opposed the larger number. “I think there’s a basic principle that if a senior member of the economic team wants something presented to the president, it should be presented—with the pros and cons,” he said. “I do not think it’s the role of the economic team to play politics.”

But Romer was reluctant to second-guess Summers on political questions in light of his imposing government résumé. She protested, but dropped the matter when Summers held firm.

When the economic team finally walked through the contents of the memo with the president-elect on December 16, Romer mentioned her preference for over a trillion dollars. Summers allowed that bigger would be better. But these points were made in passing. “I don’t remember that as part of the discussion,” conceded one member of the economic team in attendance. The final version of the memo had framed the debate around two basic choices—roughly $600 billion and roughly $850 billion—and these were the focus of the conversation. “The option of going well above $800 billion was certainly raised, but it was not discussed extensively,” Romer later recalled in an interview. “We felt the most important thing was to make sure the president-elect was on board with a plan as large as $800 billion.” Neither the memo nor the meeting would have given Obama reason to suspect this amount was arguably $1 trillion too small.

In the end, the significance of the fateful document has as much to do with what wasn’t in it as what was. Though Obama was never going to propose a $1.8 trillion stimulus, and Congress certainly wasn’t going to pass one, the president may well have felt a greater sense of urgency had he better understood how far he was from the ideal.

Regrettably, Romer’s recommendations “never made it into the memo the president saw.” Obama was not given the option of providing the stimulus the economy needed for a strong recovery because Summers didn’t want a strong recovery. Summers wanted the economy to sputter-along at an abysmal 2 percent GDP like it is today. That would keep a lid on inflation and allow the Fed to pump as much money into the financial markets as it pleased.

Obama has played a big role in this austerity fiasco too. For example, did you know that more government workers lost their jobs under Obama than any other president in history?


It’s true. Since Obama took office in 2008, nearly 500,000 public sector workers have gotten their pink slips. According to economist Joseph Stiglitz, if the economy had experienced a normal expansion, “there would have two million more.”

Of course, Obama never made any attempt to rehire these workers because rehiring them would have put more money in the pockets of people who would spend it which would boost GDP. Typically, economists think that’s a good thing. It’s only a bad thing when the Fed is working at cross-purposes and trying to keep a damper on inflation so it can bail out its crooked Wall Street buddies.

For more on Obama’s belt-tightening crusade, just look at his efforts to cut the budget deficits. Here’s a clip from MSNBC:

“Strong growth in individual tax collection drove the U.S. budget deficit to a fresh Obama-era low in fiscal 2015, the Treasury Department said Thursday…. The deficit is the smallest of Barack Obama’s presidency and the lowest since 2007 in both dollar terms and as a percentage of gross domestic product. (During) the Obama era, the deficit has shrunk by $1 trillion. That’s ‘trillion,’ with a ‘t.'” (MSNBC)

Why would Obama want to cut government spending when the economy was already in distress, capital investment was flagging, and households were still trying to pay down their debts?

Basic economic theory suggests that when private sector can’t spend, then the government must spend to offset deflationary pressures and prevent a major slump. Cutting the deficits removes vital fiscal stimulus from the economy. It’s like applying leeches to a patient with flu symptoms thinking that the blood-loss will hasten his recovery. It’s madness, and yet this is what Obama and the Congress have been doing for the last six years. They’ve kept their hands wrapped firmly around the economy’s neck trying to make sure the patient stays in a permanent state of narcosis.

That’s the goal, to suffocate the economy in order to reward the thieving vipers on Wall Street. And Obama and the Congress are every bit as guilty as the Fed.
Mazars and Deutsche Bank could have ended this nightmare before it started.
They could still get him out of office.
But instead, they want mass death.
Don’t forget that.
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Re: Has The Crash of 2016 Now Begun?

Postby divideandconquer » Fri Jan 15, 2016 9:53 am

That's the goal, to suffocate the economy in order to reward the thieving vipers...


Yep, the economy is on track for those who matter, the thieving vipers. Wall Street is only the casino, albeit global casino, the "building for aristocratic gambling" ...and depravity.
'I see clearly that man in this world deceives himself by admiring and esteeming things which are not, and neither sees nor esteems the things which are.' — St. Catherine of Genoa
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Re: Has The Crash of 2016 Now Begun?

Postby 82_28 » Fri Jan 15, 2016 11:32 am

Maybe our NYC members know more about this, but last I was there I was very surprised that the people I hung out with had "fantasy stocks" and there was some sort of website they challenged one another on. This is all well beyond my ken and also I had no interest. It seems to be a "thing" though. You know, like an environment in which they all belong.
There is no me. There is no you. There is all. There is no you. There is no me. And that is all. A profound acceptance of an enormous pageantry. A haunting certainty that the unifying principle of this universe is love. -- Propagandhi
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Re: Has The Crash of 2016 Now Begun?

Postby NeonLX » Fri Jan 15, 2016 1:14 pm

seemslikeadream » Thu Jan 14, 2016 9:35 pm wrote:nothing like a little Keiser to cheer you up



Now THAT'S entertainment!!
America is a fucked society because there is no room for essential human dignity. Its all about what you have, not who you are.--Joe Hillshoist
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Re: Has The Crash of 2016 Now Begun?

Postby Wombaticus Rex » Fri Jan 15, 2016 1:32 pm

82_28 » Fri Jan 15, 2016 10:32 am wrote:Maybe our NYC members know more about this, but last I was there I was very surprised that the people I hung out with had "fantasy stocks" and there was some sort of website they challenged one another on. This is all well beyond my ken and also I had no interest. It seems to be a "thing" though. You know, like an environment in which they all belong.


Why would that be an NYC thing in a fiber optic world? I'm betting it's much bigger in CA, given the demographics.

Monitoring stocks as if you had money on them for training purposes dates back to roughly the first markets to publish daily prices.
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Re: Has The Crash of 2016 Now Begun?

Postby norton ash » Fri Jan 15, 2016 1:38 pm

It's like the 'New York City values' that Ted Cruz pinned on Trump last night. Dog-whistle anti-semitism!!!
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Re: Has The Crash of 2016 Now Begun?

Postby zangtang » Fri Jan 15, 2016 4:26 pm

he doesn't seem to be afflicted by fear overmuch, does he?

- favorite bits are when he rips into (whales on, in the U.S, i think) Goldman Sachs &/or Jamie Dimon.
pretty sure he called Dimon a thief ( & more) on air !
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Re: Has The Crash of 2016 Now Begun?

Postby Iamwhomiam » Fri Jan 15, 2016 8:00 pm

norton ash » Fri Jan 15, 2016 1:38 pm wrote:It's like the 'New York City values' that Ted Cruz pinned on Trump last night. Dog-whistle anti-semitism!!!


Which really pissed off a lot of my neighbors! But because his name is "Cruz," they weren't going to vote for him anyway. "Trump" sounds much safer, much less "mocha." They think he's of English, Dutch, or German, lineage. And that Jeb speaks way too much Spanish, so he's out, too. It's Donald all the way. (He's not planning a trip through Dallas, is he?)
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Re: Has The Crash of 2016 Now Begun?

Postby Elihu » Wed Jan 20, 2016 10:45 am

 me to "buy gold". With what?


it is never too late to begin stacking. In fact I would advise it. Silver today has a good chance of evolving into an increasing amount of gold going forward. COINS people! Let's not poopoo they days of small things
But take heart, because I have overcome the world.” John 16:33
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Re: Has The Crash of 2016 Now Begun?

Postby NeonLX » Thu Jan 21, 2016 12:29 pm

Drink up, folks...

A measure of international trade often seen as a bellwether for the global economy has crashed to its lowest level ever, fueling fears we could be heading for another 2008-style crash.

Back in November, the Baltic Dry Index dropped below 500 for the first time in recorded history, and it has kept falling ever since. On Wednesday morning it fell to a low of 369.


http://www.businessinsider.com/baltic-d ... ?r=UK&IR=T
America is a fucked society because there is no room for essential human dignity. Its all about what you have, not who you are.--Joe Hillshoist
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Re: Has The Crash of 2016 Now Begun?

Postby 82_28 » Thu Jan 21, 2016 12:59 pm

Wombaticus Rex » Fri Jan 15, 2016 9:32 am wrote:
82_28 » Fri Jan 15, 2016 10:32 am wrote:Maybe our NYC members know more about this, but last I was there I was very surprised that the people I hung out with had "fantasy stocks" and there was some sort of website they challenged one another on. This is all well beyond my ken and also I had no interest. It seems to be a "thing" though. You know, like an environment in which they all belong.


Why would that be an NYC thing in a fiber optic world? I'm betting it's much bigger in CA, given the demographics.

Monitoring stocks as if you had money on them for training purposes dates back to roughly the first markets to publish daily prices.


I have no idea. It's the first I'd ever heard of such a thing. It makes perfect sense, but I don't do finance and never have. I sit in the middle. I care about the poor and know people in the upper echelons. In fact even fantasy football bores me and don't get involved in that either. However my point was that I sat in on "parties" in which it was the same as "draft day" in a fantasy football league. Seemed like a game and this was around the beginning of the recession. I just thought it to be callous in and of the reality of so many others. I always fancied finance as having something you don't play around with. To see these people have fun with it meant something. It came down to culture -- which is not mine. There's a fancy restaurant here in Seattle where I remember a chalkboard that sat at the entrance and people were placing bets on like when the DOW would get to 20,000. Then it collapsed and then I think they erased the tally. But I don't know. I very rarely have been there.

Also, I had to host these guys when they came to Seattle and "show 'em around" and they were pissed about the differences between NYC and Seattle. I forget their issues though. Went to an even more fancy restaurant that I got thrown out of once before for like a $900 dinner because I was wearing a hoodie. Seattle! Duh! But it was one of those jackets mandatory places. Anyway, way outside of my paygrade.
There is no me. There is no you. There is all. There is no you. There is no me. And that is all. A profound acceptance of an enormous pageantry. A haunting certainty that the unifying principle of this universe is love. -- Propagandhi
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Re: Has The Crash of 2016 Now Begun?

Postby Elihu » Fri Jan 22, 2016 10:57 am

Conversely, 1 gold may fetch 150 silver.
But take heart, because I have overcome the world.” John 16:33
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Re: Has The Crash of 2016 Now Begun?

Postby Wombaticus Rex » Fri Jan 22, 2016 4:24 pm

Via FT today:

Oil: US shale’s big squeeze

The downturn brings a sense of reckoning to the industry

In most other American cities, the sign at the Conoco station advertising petrol for $1.29 per gallon would be welcome. In Spring, Texas, a suburb on the northern side of Houston, it is a warning.

Cheap petrol is a result of the collapse in the oil price, which dropped briefly below $28 a barrel this week, a 13-year low, from $115 for Brent crude in June 2014. It has prompted a grim realisation in Houston, the capital of the US oil business, that the quick rebound many hoped for is not going to come.

Dozens of oil and gas companies went into bankruptcy last year, and tens of thousands of jobs were lost, but that was only the beginning. A reckoning is approaching that will sweep away the weaker US oil companies and force profound changes at the stronger ones. It will be a moment of truth for the North American shale revolution, which has transformed prospects for gas and oil in the US.

At $40 for a barrel of oil, the question of whether companies might need to make further big cuts in spending and jobs might have been debatable, says Dennis Cassidy of AlixPartners, a consultancy. At under $30, the question answers itself. “People are not going to press on the brakes,” he says. “They’re going to slam on the brakes.”

The shale revolution cannot be killed: the technological breakthroughs that made it possible cannot be unlearnt. US oil production can be expected to make a comeback when prices rebound. But shale oil companies have been living in an age of innocence: the industry had never seen a downturn. Not any more.

Shale today feels like information technology did as the dotcom bubble burst in 2000. Technological progress has created opportunities that will shape the world for decades to come. But investors who were lured by that promise into making rash commitments are going to lose a lot of money, and that will have lasting effects, too.

For the past 18 months, the global oil market has been oversupplied because of a surge in output from Iraq and Saudi Arabia, which made a strategic decision to abdicate its traditional role attempting to deliver price stability through changes in production. Ali al-Naimi, Saudi Arabia’s oil minister, has denied that the kingdom is trying to kill the US shale industry, but said it was not prepared to cede market share to subsidise higher-cost producers.

Now, concerns about demand have started to emerge. This week the International Energy Agency warned that with extra supply from Iran starting to come to the market after international sanctions were lifted last weekend, the oil market “could drown in oversupply”.

Oil has rebounded to about $31 in the past couple of days but is still down around 16 per cent this year. The price slump contributed to the brutal sell-off in global equity markets that shaved off $4tn in value this year before stocks began staging a rebound on Thursday. Investors have been concerned not only about oil companies but also the knock-on effects on suppliers, jobs and banks. There are also signs of financial strain in oil-producing countries.

At around $30 a barrel, a level that Saudi Aramco chairman Khalid al-Falih described as “irrational” at the World Economic Forum in Davos, there is very little US shale production that is economically viable. Companies have achieved remarkable gains in productivity by optimising production techniques and drilling only in the “sweet spots” that generate the most. They have also been driving down the prices they pay their suppliers and contractors. Jim Burkhard of IHS, the research group, says the cost of drilling and completing a typical shale well fell 35-40 per cent last year.

Even so, most shale wells would still lose money at these prices . “The cost of drilling new wells has plummeted in US shale, but not by as much as the oil price,” Mr Burkhard says. “$30 oil is suffocating.”

The effect of that is to call into question the entire business model that made the US shale oil boom possible. US crude production rose from 5.1m barrels a day at the start of 2009 to 9.7m b/d in April last year, a surge that has few parallels in the industry’s history. This is in part because of advances in the techniques of hydraulic fracturing and horizontal drilling, but also because of the easy availability of financing.

The small and medium-sized companies that led the shale revolution raised $113bn from selling shares and $241bn from selling bonds during 2007-15, according to Dealogic.

For a while, the industry was blessed by a uniquely favourable alignment of circumstances, says Trevor Wallace of PetroMark Energy Group, an investment company. The technological breakthrough came at a time when money was cheap and oil was expensive.

“Because it looked as though they were succeeding with shale, which had looked untappable , the attention of investors was drawn to these opportunities,” Mr Wallace says. “It was so exciting, the rate at which efficiency was improving. But it was based on an artificial price environment.”

The fast-moving companies that were able to tie up drilling rights in the most productive areas will survive, he says. For others, shale was like the siren’s song: “You get lured in, and then you crash on the rocks.”

Colin Fenton of Blacklight Research says the US Federal Reserve’s near-zero interest rate policy, which started from late 2008, “overstimulated debt-driven investment in energy supply”. Low rates drove investment in marginal US shale projects “that are uncompetitive at lower prices and now need to be unwound”, he wrote in a recent note.

The boom years left the US oil industry deep in debt. The 60 leading US independent oil and gas companies have total net debt of $206bn, from about $100bn at the end of 2006. As of September, about a dozen had debts that were more than 20 times their earnings before interest, tax, depreciation and amortisation.

Worries about the health of these companies have been rising. A Bank of America Merrill Lynch index of high-yield energy bonds, which includes many indebted oil companies, has an average yield of more than 19 per cent.

Almost a third of the 155 US oil and gas companies covered by Standard & Poor’s are rated B-minus or below, meaning they are at high risk of default. The agency this month revised down its expectations of future oil prices, meaning that many of those companies’ ratings are likely to be cut even further. Credit ratings for the more financially secure investment grade companies are also likely to be lowered this time.

...

Eventually, declining output in the US will help rebalance the global oil market. Once the price returns to $50-$60 a barrel, it will stimulate enough new drilling in the US to stop the decline in production, according to Skip York of Wood Mackenzie, the consultancy.
However, there are reasons to believe the growth rates seen in the first shale boom will not be back for a long time.

First, some long-term damage will have been done to the industry’s infrastructure and its skills base. The US oil and gas industry has lost 86,000 jobs over the past year, about 16 per cent of its workforce, and many of those people will never return. When the industry does want to expand again, it will need to offer attractive wages and training, which will raise costs.

Second, the industry will have taught a costly lesson to investors about the inherent cyclical nature of commodity businesses. “Lenders can’t come back the way they did before,” says Allen Gilmer of Drillinginfo, a data analysis firm. “The assumption then was that there wasn’t this kind of downside risk for the creditors. Now that risk has to be taken into account.”

That means financing is likely to be more expensive and harder to find. Saudi Arabia’s strategy of allowing oil prices to fall to curb competing sources of production appears to be succeeding.

“They have cut the cash available to finance new resources,” Mr Gilmer says. “If the intention was to handicap US shale, they’ve done a fantastic job of it.”


..."Second, the industry will have taught a costly lesson to investors about the inherent cyclical nature of commodity businesses."

That, of course, never actually happens, which is why CME stays winning and winning and, on occasion, winning.
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Re: Has The Crash of 2016 Now Begun?

Postby seemslikeadream » Fri Jan 22, 2016 4:28 pm

The boom years left the US oil industry deep in debt. The 60 leading US independent oil and gas companies have total net debt of $206bn, from about $100bn at the end of 2006. As of September, about a dozen had debts that were more than 20 times their earnings before interest, tax, depreciation and amortisation.



who are they indebted to?

Big banks

who on the hook?

all us little folk.....again
Mazars and Deutsche Bank could have ended this nightmare before it started.
They could still get him out of office.
But instead, they want mass death.
Don’t forget that.
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seemslikeadream
 
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