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Daily Digest 12/16 - S. America Staring Down An Economic Abyss, Australia's Budget Outlook Worsens

Wednesday, December 16, 2015, 10:18 AM


Oil Rout to Claim More Victims After First Norway Bankruptcy

Dolphin Group ASA, a seismic surveyor that maps the seabed for oil and gas reservoirs, became the first Oslo-listed company in the industry to file for bankruptcy Monday. One of its competitors, Polarcus Ltd., is in talks on restructuring debt -- but the threat won’t stop there, with insolvency cases bound to multiply among drillers as well, analysts say.

Derivatives: The toxic financial instrument on par with terrorism

The estimates of the notional value, defined as the total value of a leveraged position’s assets, of the world’s derivatives market ranges from $600 trillion to $4 quadrillion. Remember that the GDP of the entire world ranges between $70-75 trillion. At some point, if history is any guide, the derivatives bubble will burst and the effects worldwide will be beyond catastrophic.

China's Economic Growth Rate Is Seen Falling Until at Least 2018

Six of 12 economists surveyed by Bloomberg last week say 2018 will be the turnaround year, while five said it will take until 2019 or after for growth to re-accelerate. The outlook underscores the challenge facing President Xi Jinping as he aims for gross domestic product gains averaging at least 6.5 percent per year for the next five years so he can deliver on his goal of doubling 2010 income and GDP levels.

Riley: Junk Bond Collapse Hits RI Pension Fund

Gina Raimondo’s hedge fund strategy designed to improve returns is a total bust and soon we will find out just how bad it really is when November and December 2015 returns are reported in Rhode Island.

Russia's Record Bank Cull Set to Continue in 2016 Amid Recession

The number of shuttered lenders represents 13 percent of the industry, the most in 15 years of data on the regulator’s website. Herman Gref, the head of Russia’s biggest lender, Sberbank PJSC, predicted last week that another 10 percent will lose their licenses next year.

Natural Gas Sinks to 14-Year Low

On an inflation-adjusted basis, Monday’s settlement price for natural gas was the lowest since February 1992 and was within 10 cents of the inflation-adjusted record low from January 1992 of $1.80 per million BTUs.

More Singapore companies likely to seek relaxed debt conditions next year

MORE companies next year are likely to ask bondholders to relax financial convenants as economic conditions get more challenging, said a fixed income banker.

Chesapeake Energy Works With Advisers To Reduce Debt Load

But the tumble in natural gas prices has hurt the company, which has posted three straight quarterly losses this year. Chesapeake ended September with $1.8 billion in cash, down from $4.1 billion at the end of 2014, according to regulatory filings.

Mariachis, Tacos, $100 Billion Oil Debt as Pemex Opens in Texas

In the meantime, Pemex’s financial troubles are expected to deepen, with more borrowing raising its debt burden to more than $100 billion in 2016, according to a Dec. 2 investor presentation posted on the company’s website.

Third Avenue Ripples Felt in Japan as Fidelity Fund Drops

The junk-bond market is headed for its first annual loss since 2008 after a wave of redemption requests from investors ripples around the globe. Japanese investors held at least 3.8 trillion yen in high-yield mutual bond funds on Monday, according to data compiled by Bloomberg, after ramping up investments in higher-yielding overseas assets as the Bank of Japan pushed down domestic interest rates.

Wilbur Ross: 'Wall' of junk bond maturities coming

Companies are running out of time, Ross said, and with the Federal Reserve apparently ready to hike interest rates there are fewer options for cheap refinancing as $1.4 trillion of debt is about to come due.

Creditors Bawl: How Investors Ignored Risk of Junk-Bond Rout

Investors have poured $240 billion into junk-bond funds since 2008, tripling the total commitment, in a desperate hunt for decent returns while the Federal Reserve pumped $3.5 trillion into the financial system and kept interest rates near zero for seven years. Junk-bond traders helped fund America’s shale boom and gave the cheapest money ever, even to companies deemed by Moody’s Investors Service to be “very high credit risk, poor standing.” Now they’re finding out what happens when the fling is over and everyone wants their money back at once.

Specialty drug costs soar 32% to $438 million at CalPERS amid uproar over prices

One of the nation's biggest healthcare buyers, the California Public Employees' Retirement System, said its specialty drug costs soared 32% last year to $438 million.

Obamacare Sign-Ups Could Get A Bump As Higher Penalties Kick In

Penalties for failing to buy insurance will roughly double. A family of four that makes $250,000 a year could face a fine when tax time rolls around in 2017 that approaches $10,000 if they don't get coverage for 2016.

China’s Workers Are Fighting Back as Economic Dream Fades

The Hong Kong-based civic group China Labour Bulletin says strikes and labor protests nationwide nearly doubled in the first 11 months of 2015 to 2,354 from 1,207 in the same 2014 period.

Illinois budget impasse causes freeze to state police patrol car fund

The state police are supposed to receive money from license plate fees to pay for replacements for old and damaged patrol cars. However, Gov. Rauner and legislatures have those funds on hold, even if the funds are already dedicated

SIU system facing financial woe of 'crisis proportion' (Illinois)

“We’re going to have to figure out a means to pay back about $200 million in operations and about $46 million or so in student aid and grants and contracts we typically have from the state,” Dunn said.

Exports fall for 12th straight month, down 24.43% in November (India)

India’s merchandise exports fell for the 12th consecutive month in October, this year. As compared to this, during the 2008-09 global financial meltdown, the decline was for nine months in a row.

Japan firms' inflation expectations fall, keep BOJ under pressure

The outcome may heighten market expectation of near-term monetary easing since BOJ Governor Haruhiko Kuroda has said the bank won't hesitate to act if sliding inflation and overseas headwinds discourage firms from raising prices, analysts said.

Brazil Tackles 2016 Budget Amid Divergent Pressures

Ratings company Moody’s Investors Service has put the country under watch for a possible downgrade to junk, which could trigger a selloff of Brazilian assets and weaken the currency.

South America is staring down an economic abyss

In just the last few weeks, Argentina and Venezuela's left-wing governments have lost at the polls and Brazil's is looking wobbly. That's what happens when the commodity boom that had fueled your social spending turns to bust-due, in large part, to China's slowdown.

Australia's Budget Outlook Worsens

Treasurer Scott Morrison's midyear budget update showed that Australia's deficit is expected to widen to 37.4 billion Australian dollars (US$27.1 billion) this fiscal year—amounting to 2.3% of gross domestic product—compared with the A$35.1 billion, or 2.1% of GDP, that was forecast in May.

'Chinese Shock' Would Suppress Global Rates, Trade, Fitch Says

Should such a sharp slowdown scenario play out, global GDP growth would decline to 1.8 percent in 2017, Fitch said, and “as a result, any rise in U.S. and euro-zone short-term interest rates would be postponed, and oil prices would remain under pressure.”

Shipping Index Plunges to Fresh Record Amid China Steel Slump

The Baltic Dry Index fell 4.7 percent to 484 points, the lowest in Baltic Exchange data starting in January 1985. Rates for three of the four ship types tracked by the exchange retreated. China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence.

Chinese slowdown likely to hit global growth

Global GDP growth is now expected to be 3.1 percent in 2017, according to Oxford Economics' global economic model which was used by Fitch to frame its "shock" China scenario.

Abe Deflation Fight Has Foes on Nearly Every Street Corner

About one in three vending machines offers reduced prices, according to Tokyo-based beverage researcher Inryou Souken. That’s even after a consumption-tax increase in April 2014 brought the benchmark cost of a 350-milliliter soft drink to 130 yen ($1.07) from 120 yen, where it had been stuck since the late 1990s.

Original Sin Stores Up Pain as Asean Firms Face $45 Billion Bill

Thirty-eight percent of bonds sold by Indonesian, Malaysian, Philippine and Thai companies this year have been in foreign currencies, up from 27 percent in 2014, data compiled by Bloomberg show. Companies face $45 billion of bond repayments in greenbacks, euros or yen in the coming five years, breaking records set after the 1997 Asian Financial Crisis, when economists Barry Eichengreen and Ricardo Hausmann coined the term "original sin" to describe the dangers of overseas borrowing.

Credit market nerves wear on Italy, Spain bonds as Fed hike nears

Investor fears that the first interest rate rise from the United States in nearly a decade could trigger a spate of defaults in highly leveraged companies has started to erode confidence in some of Europe's lower-rated sovereign debt.

Bernanke says Fed likely to add negative rates to recession-fighting toolkit

The Federal Reserve should consider using negative rates to counter the next serious downturn, said former chairman Ben Bernanke in an interview with MarketWatch.

Gold & Silver

Click to read the PM Daily Market Commentary: 12/15/15

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."


saxplayer00o1's picture
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Posts: 4261
China's 2016 Growth May Slow to 6.6 Percent,State Academy Says

China's 2016 Growth May Slow to 6.6 Percent, State Academy Says

Bloomberg-8 hours ago
Congressional lawmakers in July 2011 allowed the nation to tiptoe to the brink of default on debt that it had already incurred by failing to agree on a higher ...

PBOC Makes China Junk Bonds More Resilient Than U.S. Peers

Bloomberg-11 hours ago
Premier Li Keqiang has said he would allow more defaults while preventing systemic ... The average yield on U.S. high-yield debt rose above that for similar ...

Fitch Downgrades Brazil to Junk, With Negative Outlook

Wall Street Journal-1 hour ago
Fitch is the second of the big-three ratings companies, after Standard & Poor's, to downgrade Brazil's debt to junk, which could trigger a selloff ...

Arch Coal to delay bond interest payment as bankruptcy looms

Reuters-2 hours ago
Arch Coal, which ended a proposed debt swap in October, said it had 30 days to continue talks with creditors to restructure its balance sheet. Companies ...

Arch Coal delays interest payment in attempt to avoid bankruptcy
Casper Star-Tribune Online-Dec 15, 2015

Schools look for relief from pension squeeze (Pennsylvania)

The Herald-4 hours ago
Pension costs were the most common reason cited by districts that asked to ... This comes as the state tries to burrow out from under $50 billion in pension ...

Water rates to spike to help LA's aging pipe system

KABC-TV-12 hours ago
... of the revenue will go into capital projects, while some of the revenue will also go toward higher operating costs and the unfunded employee pension liability.


saxplayer00o1's picture
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Posts: 4261
China Seen Selling More Sovereign Bonds in 2016 to Fund Spending

China Seen Selling More Sovereign Bonds in 2016 to Fund Spending

Bloomberg-8 hours ago
Shenwan Hongyuan Group Co. projects 2.9 trillion yuan, 38 percent more than its ... “There's plenty of room for China to increase government debt to stabilize ...

Foreigners Sold U.S. Treasuries at Record Pace in October

Bloomberg-20 hours ago
China, the biggest foreign holder of U.S. government debt, had $1.25 trillion in bonds, notes and bills in October, down $3.2 billion from a month earlier, ...

South Korea cuts 2016 GDP forecast to 3.1%

MarketWatch-11 hours ago
Korea's fast-aging population as well as high levels of household debt would possibly ... Korea's current-account surplus for 2016 is likely to narrow to $98 billion ...

City's $7B municipal hospital system can barely pay its bills

New York Post-11 hours ago
DiNapoli said NYC Health + Hospitals' deficit will nearly double over the next three years to reach $2 billion by 2019 — a startling figure given that the deficit ...


thc0655's picture
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Posts: 1744
We could be in a worse spot

We could be in a worse spot.  Another way to look at this article is: look what we in the West have to look forward to as current trends where we live continue in the same direction we've been moving for decades.


My grandfather lived out his life in a small Siberian town called Omsk. He was a medical doctor, specialising in radiology, who wrote a bit of poetry and took beautiful photographs of his family.    

Omsk is a miserably cold place. When I visited there one February the mercury dipped to below -30°C, during the day. Dostoevsky was sent there by the Czar to spend four years in a prison labour camp.


My grandfather worked hard to build a life in this frozen land. He was very good at his job and was respected by his community. He smoked and drank too much, but he was going to have a comfortable, well-earned retirement.


Then the system crashed.


The Soviet Union collapsed, the country’s economy was looted and mad economic scientists experimented with the currency, adding or subtracting zeros as they saw fit. People’s entire life savings or pensions were erased. Thirty, forty, fifty years of hard work evaporated like snow at the arrival of spring. Some people’s monthly pensions were suddenly enough to buy no more than a couple of cartons of cigarettes.


Imagine that for a moment. An entire lifetime of doing the right things undone by people you have never met – and who are often nowhere near your level of intellect – but who control every aspect of your existence.

The author, in the meat of his piece, goes on to describe how Zuma is destroying South Africa where he now lives and works.

Arthur Robey's picture
Arthur Robey
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Posts: 3936
Useless breeders
Emergency crews rescued 1,433 children from cars in the 12 months to the end of August, a 23 per cent increase in calls on the previous year.
Families and Children Minister Jenny Mikakos said there were no excuses for leaving children inside hot cars.
"Tragically, eight incidents have involved children being taken to hospital," she said.
I trust they smashed the side windows as a matter of cause.


Arthur Robey's picture
Arthur Robey
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Posts: 3936

CME for Saturday. Direct hit.

KennethPollinger's picture
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Posts: 670
Is this possible? Radical Muslims

The KEY question:  How distinguish the radical Muslims from the so-called moderates??

With thousands invading Europe and other countries, how know who is who?


VERY disturbing and difficult to watch?  Be prepared, please  Not for the faint of heart.  Ken


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