Daily Digest

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Daily Digest 9/21 - Fed Cred Dead, Investigating China's Smog

Monday, September 21, 2015, 10:58 AM

Economy

Fed Cred Dead (Michael W.)

It’s especially like this these days in the so-called “emerging markets” — e.g. places in the world with large populations of willing factory slaves. The traffic in shipping-out containers full of flat screen TVs (or shipping-in the raw materials to make them) won’t work very well without letters-of-credit, which are promises between banks to make sure that the stuff on the receiving end gets paid for. That becomes difficult when national currencies drop 3.5 percent in value one day and then 4 percent another day, and so on. An eight-year-old can figure out how that math works.

The Three Things You Need to Look For in a Stock (Tiffany B.)

Dividend-paying stocks are the key to growth in stagnant stock markets. Yield from dividend-paying stocks continue to pile up while other investors’ returns remain in a rut. Plus, with the traditional income world stuck with minimal yields, investors will maintain demand for dividend-paying stocks, keeping them elevated higher than other stocks.

But not all dividend-paying stocks are a good investment.

Sovereign Debts: How Defaults May Unfold (Aaron M.)

You must be careful in the post-2015.75 era. Owning even short-term government paper can result in a conversione forzosa, which is the usurpation of capital by sheer force. This is one form of default that people need to realize has also been a means of default. The City of Detroit suspended all debt payments between 1937 and 1963. Britain entered a moratorium in 1931 on its debt, resuming years later.

The Latest Margin Debt Figures Confirm A Major Bear Market Is Probably Underway (Aaron M.)

Recently, we hit record-high levels of margin debt, on both an absolute level and in relation to overall economic activity. I like to look at margin debt relative to GDP because it is a simple way to measure the popularity of financial speculation relative to overall economic activity. When this measure is very high, it tells me investors are highly interested in speculating in equities.

What California can learn from Saudi Arabia’s water mystery (jdargis)

Saudi Arabia’s mysteriously disappearing water came to light around the turn of the century. By 2002, the government had formed the Ministry of Water to search for answers. But the Sherlock Holmes of this story came from a surprising background.

A Saudi banker turned water detective put together the pieces in 2004 and published the now seminal report “Camels Don’t Fly, Deserts Don’t Bloom.” Elie Elhadj’s investigation revealed the culprit: Wealthy farmers had been allowed to drain the aquifers unchecked for three decades.

The Forgotten Project That Could Have Saved America From Drought (jdargis)

“For those of us who work in the water world, NAWAPA is a constant presence,” says Peter Gleick of the Pacific Institute. “It’s the most grandiose water-engineering project ever conceived for North America. It’s both a monument to the ingenuity of America and a monument to the folly of the 20th century. In a sense, we measure all other ideas against it.”

As journalist Marc Reisner observed in his book Cadillac Desert, the project had only two major drawbacks: It would destroy anything still resembling nature in western North America. And it might require taking Canada by force.

China Keeps Oil Prices From Falling As It Fills Its Strategic Reserves (Tom K.)

With a lack of overnight economic data to consume, we are left to reflect on yesterday’s Federal Reserve decision to keep interest rates at 0.25%. While their justification to do so seems understandable – a lack of inflation remains concerning as does economic weakness in emerging markets – what is most curious is the negative response by the crude complex. Despite a weakening dollar (a stronger dollar was highlighted as another pillar of pain upholding the decision not to raise rates), oil prices have shown downside movement ever since. It raises the question: what would prices have done if they had raised rates?

China’s Communist-Capitalist ecological apocalypse (richcabot)

For more than three decades, China’s “miracle” economy has been the envy of the world or at least the envy of capitalist economists for whom wealth creation is the highest purpose of human life. Since 1979, China’s GDP has grown by an average of just under 10% per year. Never, the World Bank tells us, has a nation industrialized and modernized so quickly or lifted so many millions out of poverty in such a short time. From a backward, stagnant, largely agrarian socialism-in-poverty, Deng Xiaoping brought in foreign investors, introduced market incentives, set up export bases, turned China into the light-industrial workshop of the world, and renovated China’s huge state-owned enterprises (SOEs).

Under the Dome – Investigating China’s Smog (richcabot)

Former celebrity TV anchor Chai Jing quit her job after her baby daughter was born with a lung tumor, and after a year of rigorous investigation, launched this 1 hour 40 minute documentary about China’s smog: what is smog? Where does it come from? What do we do from here?

Gold & Silver

Click to read the PM Daily Market Commentary: 9/18/15

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

5 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4166
Central Banks

Yellen Pause Ups Pressure on Draghi as Global Pessimism Mounts

Bloomberg-7 hours ago
Draghi and other Governing Council members will make public appearances ... or broadening the program beyond sovereign and agency debt, covered bonds, ...

RPT-BOJ brainstorms stimulus overhaul as options dwindle -sources

Reuters-19 hours ago
TOKYO, Sept 18 (Reuters) - Sources say the Bank of Japan has been quietly brainstorming the idea of overhauling its massive monetary stimulus programme ...

Brazil's economic activity drops 0.02 pct in July - central bank
Reuters-3 hours ago

 

Economists Cut Brazil's Economic Outlook for This Year and 2016 ...

Nasdaq-3 hours ago
Brazil's gross domestic product is expected to contract 2.70% this year, according to a weekly central-bank survey of 100 economists, compared with ...

49% Haircut May Be Best These Brazil Mall Investors Can Hope For

Bloomberg-34 minutes ago
The mall operator is offering to buy back as much as $50 million worth of its senior debt for a fraction of the face value: 51 cents on the dollar if bondholders ...

Brazil's Real Drops Toward Record Low as Budget Pessimism Rises

Bloomberg-1 hour ago
Yields on Brazil's $4.3 billion of bonds due in 2025 rose to 5.78 percent as the cost of insuring the country's debt for five years with credit-default swaps rose 2.3 ...

Independent Catalonia will be kicked out of the eurozone, warns ...

Telegraph.co.uk-14 minutes ago

Catalan banks would also "stop having access to the European Central Bank's facilities", cutting off the last remaining link between the financial system and the ..

Empty Punchbowl Leaves Central Banks Powerless to Bolster Stocks

Bloomberg-4 hours ago
Central banks are past the point of having to worry about withdrawing the punch bowl before the party gets out of hand. It's already running dry.

UPDATE 1-Russia c.bank sets new rouble rates for banking ...

Reuters-1 hour ago
Banks currently use rates of 45 roubles per dollar and 52 roubles per euro in rules lasting from ... The central bank also said on Monday it would extend until Jan.

 

Eurozone Nears Limits of What Monetary Policy Can Do

Wall Street Journal-21 hours ago
As the Federal Reserve chews over when to raise interest rates, after holding fire Thursday, European Central Bank officials can claim some success in traveling ...
 

Italian Savers Wake Up to Risk in $230 Billion of Bank Bonds

Bloomberg-9 hours ago
Local savers, who hold about 200 billion euros ($230 billion) of bank bonds, are ... The central bank warned savers about how BRRD would increase bond risks ...
 

Greece's liabilities toward ECB payment system near their 2012 highs

Reuters-1 hour ago
The Target 2 system facilitates payments between banks in different euro zone countries by channeling them through each national central bank's account at the ...

India Needs Lower Interest Rates, Finance Chief Jaitley Says

Bloomberg - ‎9 hours ago‎
India needs lower interest rates, and the central bank must decide how much to cut, Finance Minister Arun Jaitley said. "India obviously does need cuts but to what extent, I think, is a prerogative of the central bank and they will factor in all these ...
 

UPDATE 1-Taiwan export orders fall for 5th month on global slowdown

Reuters-4 hours ago
The drag from exports on economic growth has raised the possibility the central bank may cut its policy interest rate for the first time since 2009 on Thursday.
 

New Home 'Tsunami' May Snap Sydney Romance With Exuberant ...

Bloomberg-19 hours ago
Housing and home prices have been the biggest beneficiaries of the central bank's 10 interest-rate cuts since November 2011 to a record low that made ...

S&P Says China's Banks Face Growing Risk From Bad Debt

Wall Street Journal-3 hours ago
BEIJING—In the latest sign of headwinds hitting the Chinese economy, a U.S. ratings firm said China's banks face growing risk tied to rising bad loans and ...

World economic growth worse than expected: Bank of Spain

Economic Times-7 hours ago
MADRID: World economic growth is worse than expected, prompting the United States and Britain to delay any normalisation of monetary policy, the Bank of ...

Miners turn to alternative finance to cut debt as downturn grinds on

Reuters-4 hours ago
Besides Glencore's potential $1 billion deal, Teck Resources, whose credit rating was slashed to junk this month due to its heavy debt load, has said it is open to ...

Plunging oil prices put question mark over $1.5tn of projects

Financial Times - ‎17 hours ago‎
Plunging oil prices have rendered more than a trillion dollars of future spending on energy projects uneconomic, according to a study that suggests that the impact on industry operators is worsening. A report published Monday says $1.5tn of potential ...
 

Oil Price Rout Seen as Threat to $1.5 Trillion of New Projects

Bloomberg - ‎12 hours ago‎
About $1.5 trillion of potential investment in new oil projects isn't viable with crude prices at $50 a barrel, highlighting the need to reduce costs, according to consultant Wood Mackenzie Ltd. The proposed projects, including spending on North ...
saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4166
Trading Meat for Tires as Bartering Economy Grows in Greece

 

The New Bond Market: Bigger, Riskier and More Fragile Than Ever

Wall Street Journal-13 hours ago
It is a world of low interest rates that fueled massive debt issuance and ... Since 2007, $1.5 trillion has gone into U.S. bond mutual and exchange-traded funds ...

Trading Meat for Tires as Bartering Economy Grows in Greece

New York Times-8 hours ago
As Greece grapples with a continued downturn, bartering is gaining traction at the margins of the economy, part of a collection of worrisome signs for Prime ...

Shutdown odds increase

Politico-5 hours ago
U.S. and European debt yields also tumbled, with the policy-sensitive ... in Shanghai and sudden devaluation of the yuan sparked a global selloff. ... Third estimate of Q2 GDP on Friday at 8:30 a.m. expected to be unchanged at 3.7 percent …

 

Tall's picture
Tall
Status: Platinum Member (Offline)
Joined: Feb 18 2010
Posts: 564
Long but good - exploration of the American Dream

Few wish to examine what sustainability really means.

"But living at a sustainable level will involve sacrificing the American Dream. As an illustration, consider the energy used in our housing and buildings, which amounts to 40% of our energy diet and produces about 40% of our emissions. The progressive imagination is often filled with fantasies of green housing, housing which consists of high-tech foam insulation, solar panels, and all sorts of ultra-efficient gimmickry. Sanders, for his part, promises to help “weatherize millions of homes.” All this is good stuff, and worth pursuing. But the attraction, here, has more to do with the initiatives and innovations will allow us to maintain the dreams of middle-class comfort, rather than with finding the best way to reduce energy used on housing.

For there is a simple way everyone could cut their housing energy use instantly in half. But it violates the American Dream. This simple technique involves doubling up in our current space. It saves money and energy, but it is the opposite of what we expect, which is to have more personal space than previous generations. In 1950, after all, Americans had an average of less than 300 square feet of living space, each. By 2000, that was increased threefold to almost 900 square feet per person. "

http://www.resilience.org/stories/2015-09-18/one-and-half-cheers-for-ber...

rjs's picture
rjs
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Posts: 445
Oil Industry Debt Service to Cash Flow Ratios

an excerpt from my weekly synopsis:

the most interesting report from the EIA this week came in their Friday release of "Today in Energy", which as the title suggests is a daily blog-like posting from the Energy Department which covers the whole gamut of energy related topics...the Friday report was titled "Debt service uses a rising share of U.S. onshore oil producers’ operating cash flow" and even without reading the report we could see from the first graph, which we'll include below, just how tight the situation had become for US oil producers...what the bar graph below shows is the annualized debt service of US oil producers as a percentage of their cash flow from operations stated quarterly, from the beginning of 2012 through the 2nd quarter of this year...what that means, stated more plainly, is that each bar represents the average oil producer's debt service to cash flow ratio over the preceding year, such that the bar for the 2nd quarter represents the average ratio over the year starting with the preceding 3rd quarter...so while we can see that for the industry as a whole, debt service has long been above 50% of their operating cash flow, once oil prices started collapsing in the 4th quarter of last year, that percentage quickly climbed to over 70%, and as of the 2nd quarter of 2015 it had reached 83% of cash flow, or as the EIA explains "from July 1, 2014 to June 30, 2015, 83% of these companies' operating cash was being devoted to debt repayments"...thus, that 83% figure includes an extended period of time when oil prices had averaged above $80 a barrel, and almost no time when oil prices were in the current $44.68 per barrel range, almost a deliberate obfuscation...since this is an industry wide average, it includes the vertically integrated major oil companies with lower debt levels and greater than average cash flow from operations, which probably means that for a high percentage of independent exploitation companies, their debt service has exceeded their cash flow all year and will only get worse, illustrating the ponzi-scheme nature of the fracking business, where new suckers with fresh cash are continually being sought to pay off the original creditors...but it's now getting close to game over for the frackers; when their economically recoverable reserves are reevaluated by the banks in their semi-annual review on October 1st, the driller’s banks lines of credit will almost certainly get cut off...and since their cash flow wont pay the 11% interest now demanded for new energy bonds, we expect many more will be forced into bankruptcy by Thanksgiving, roughly one year after the Saudis declared war on their scheme...

September 18 2015 oil co debt service as percentage of cash flow

 

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 852
What do you mean "we", pale face?

We americans have increased our living space to 900 sq ft per person?

Let's see, in my trailer park are lots 30'x80'; my trailer is 63'x12' exterior, with about 600 sq' of living space for six, about 100' per person.

We make use of the outdoors (thus getting a tan: no pale faces here).

Like the Lithuanian/Russian apartments, we have a bed/couch in each major room (7'x8') except for the main bedroom, which has a bunk bed.

On the other hand, I'm sure everything averages out. So for our six people with 100 sq' of living space, there's some one person out there with 5700 sq. feet of living space.

And with the 80/20 rule, that's likely actually the case, right?

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