The unknown is how much of the $2.77 trillion of junk CDS on bank balance sheets on June 30 this year was energy-related. If history is any indicator, the CDS in the distressed energy sector already far outweighs its 18% share of the junk bond market.
But if we watch for the following three signposts, we’ll know that the crisis play is happening again:
- One sign would be for non-energy junk bonds to begin dropping in price. That would mean large holders are exiting from all junk bonds, not just those companies affected by low oil prices.
- Another sign would be sudden drops in share prices for banks or insurance companies that hold small amounts of energy-related bonds or bank loans, a clue that some market participants think they have derivative exposure.
- A third sign to look for would be the rumors or news that the big, investment-grade energy companies are having trouble renewing their Commercial Paper, bank loans or maturing bonds (the Exxon-Mobils and Shells of the world).
Do we need to remind ourselves that Fannie and Freddie were the Exxon-Mobil and Shell of the mortgage business? Or that no target is too big if trillions of dollars can be used to make the bets?
So where will the “next trade” be?
Anywhere there might be weakness.
This month, it’s in energy companies that borrowed more than $200 billion while planning on oil prices staying over $100 a barrel, and gasoline staying over $3 a gallon.
Only time will tell whether there have been enough bets against those optimistic energy companies to make it a problem for everyone, and not just them.
2--Blinking Red: The Crude Crash Comes To Wall Street: Counterparty Risks Rear Their Ugly Heads Again, zero hedge
Credit decouples from stocks and oil prices
3---Warren speech: Break up Citigroup
“A century ago, Teddy Roosevelt was America’s trustbuster. He went after the giant trusts and monopolies in this country, and a lot of people talk about how those trusts deserved to be broken up because they had too much economic power. But Teddy Roosevelt said we should break them up because they had too much political power. Teddy Roosevelt said break them up because all that concentrated power threatened the very foundations of our democratic system.”
“And now we’re watching as Congress passes yet another provision that was written by lobbyists for the biggest recipient of bailout money in the history of the country. And it’s attached to a bill that needs to pass or else the entire federal government will grind to a halt.”
“Think about this kind of power. A financial institution has become so big and so powerful that it can hold the entire country hostage. That alone is a reason enough for us break them up. Enough is enough
4---What the Heck Just Transpired in the Global Markets? , wolf street
Low oil prices are good for consumers who drive a lot, and it brings down prices of related products. But they are wreaking havoc in the American oil patch. The shale revolution was funded with debt – much of it junk rated. That debt is now deteriorating. And companies that need more money are hitting a wall of resistance. Defaults will follow. And the energy junk-bond debacle has already begun to ooze into other areas.
5---Americans are 40% poorer than before the recession, marketwatch
The net worth of American families — the difference between the values of their assets, including homes and investments, and liabilities — fell to $81,400 in 2013, down slightly from $82,300 in 2010, but a long way off the $135,700 in 2007, according to a new report released on Friday by the nonprofit think-tank Pew Research Center in Washington, D.C.
“The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of American families,” the report found.
6---Elizabeth Warren on Citigroup
Enough is enough
7--Bail-In and the Financial Stability Board: The Global Bankers' Coup , ellen brown
8--Mikhaïl Khazine sur allocution de Poutine//Mikhail Khazin about Putin's speech 4. Dec. 2014, "Must see"
9---Opec willing to push oil price to $40 says Gulf oil minister, Telegraph
Senior Opec ministers says cartel has no fear of oil prices falling to levels as low as $40 per barrel amid price war with Russia and US shale
10---The Secret Stupid Saudi-US Deal on Syria, F William Engdahl, BFP
The details are emerging of a new secret and quite stupid Saudi-US deal on Syria and the so-called IS. It involves oil and gas control of the entire region and the weakening of Russia and Iran by Saudi Arabian flooding the world market with cheap oil. Details were concluded in the September meeting by US Secretary of State John Kerry and the Saudi King. The unintended consequence will be to push Russia even faster to turn east to China and Eurasia. - ....
the long-time US ally inside OPEC, the kingdom of Saudi Arabia, has been flooding the market with deep discounted oil, triggering a price war within OPEC, with Iran following suit and panic selling short in oil futures markets. The Saudis are targeting sales to Asia for the discounts and in particular, its major Asian customer, China where it is reportedly offering its crude for a mere $50 to $60 a barrel rather than the earlier price of around $100.  That Saudi financial discounting operation in turn is by all appearance being coordinated with a US Treasury financial warfare operation, via its Office of Terrorism and Financial Intelligence, in cooperation with a handful of inside players on Wall Street who control oil derivatives trading. The result is a market panic that is gaining momentum daily. China is quite happy to buy the cheap oil, but her close allies, Russia and Iran, are being hit severely. - ...
According to Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center, the dramatic price collapse is being deliberately caused by the Saudis, OPEC’s largest producer. The public reason claimed is to gain new markets in a global market of weakening oil demand. The real reason, according to Abanmy, is to put pressure on Iran on her nuclear program, and on Russia to end her support for Bashar al-Assad in Syria. When combined with the financial losses of Russian state natural gas sales to Ukraine and prospects of a US-instigated cutoff of the transit of Russian gas to the huge EU market this winter as EU stockpiles become low, the pressure on oil prices hits Moscow doubly. More than 50% of Russian state revenue comes from its export sales of oil and gas. The US-Saudi oil price manipulation is aimed at destabilizing several strong opponents of US globalist policies. Targets include Iran and Syria, both allies of Russia in opposing a US sole Superpower. The principal target, however, is Putin’s Russia, the single greatest threat today to that Superpower hegemony - ...
the oil weapon is accelerating recent Russian moves to focus its economic power on national interests and lessen dependence on the Dollar system. If the dollar ceases being the currency of world trade, especially oil trade, the US Treasury faces financial catastrophe. For this reason, I call the Kerry-Abdullah oil war a very stupid tactic. -