Baltic Dry Index. 601 +03 Brent Crude 61.64
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"Never
in the history of the mankind, have so many owed so much to so few."
With apologies to Winston Churchill.
In oil patch news, Uncle Scam’s frackers are still piling on more pain.
Below, more on the madness of QE and ZIRP displacement and malinvestment, as the
flood of money from the central banks chases high risk yield. Any guesses as to
how all this ends? BP thinks they know, and it’s not good for Scotland or the
North Sea high cost oil. Time to bring out the Economist’s old “Skintland”
headline again. Just don’t let on to the UK voters north of the border ahead of
next month’s UK general election. Hold off on those Dallas “nodding donkeys”
for Kent and Sussex.
Oil Companies Are Getting a Second Chance in the Bond Market
12:53 AM BST April 22, 2015
Energy companies desperate to head off a potential funding squeeze are
getting a second chance in the bond market, allowing them to keep drilling as
they seek to weather the oil-price slump.Halcon Resources Corp., run by one of the architects of the U.S. shale boom, sold $700 million of bonds Tuesday that pay junk yields while pledging assets to back the debt. The Houston firm joins explorers Energy XXI Ltd. and Goodrich Petroleum Corp. in leading almost $10 billion of second-lien bond offerings in the U.S. this year, a record pace for issuance of such securities, according to data compiled by Bloomberg.
The firms are getting a lifeline as banks shrink credit lines that are tied to the value of oil reserves. They’ve been able to pile on new debt because their existing obligations -- most of which were issued at the height of the shale boom -- exclude borrowing restrictions typically demanded by junk-bond investors. Those debtholders are now being punished because the new creditors are getting a stronger claim on assets.
“It’s kind of the last bullet in the chamber for a lot of these companies in the most precarious situation,” John McClain, a money manager who helps oversee $15 billion at Columbus, Ohio-based Diamond Hill Investment Group, said in a telephone interview. “We saw weak covenants across the broader energy space, so the ability to do second liens was certainly there. It is a negative for unsecured holders, as it’s diluting your claim.”
Oil companies are facing cuts in their credit lines this month as banks reevaluate the maximum amount they can borrow, a determination based on the value of their oil reserves. The loans are typically reset in April and October, meaning the squeeze happening now may get worse.
Crude prices have dropped more than 48 percent to $55.26 since peaking at $107.26 in June.
While some oil and gas explorers have been shut out of capital markets altogether, stabilizing oil prices are prompting investors to lend to those with the best shots at survival.
“Companies are willing to pay for liquidity,” said Christian Hoffmann, a money manager who helps
oversee $65 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico.
“Second-lien debt is a lever a lot of energy companies are pulling to access liquidity at a time when it’s not always easy to access capital markets.”
More
API data show U.S. crude supply up 5.5 mln barrels
Published: Apr 21, 2015 4:51 p.m. ET
The
American Petroleum Institute late Tuesday reported that crude supplies climbed
5.5 million barrels for the week ended April 17, according to sources. That was
more than double the 2.6 million-barrel increase forecast by analysts surveyed
by Platts. Sources said the API reported that gasoline stockpiles rose 1.1
million barrels, while distillate inventories climbed 1.7 million barrels.
Following the data, June crude CLM5,
-1.02% was at $56.36 a
barrel in electronic trading, down from the $56.61 close
on Nymex. The more closely watched Energy Information Administration report
is due Wednesday.
BP sees 'massive' shock for North Sea as oil glut deepens
The world's over-supply of oil is like the deep slump in 1986. BP fears it may get worse as Iran's supply hits market and US shale hold firm
The North Sea oil industry faces
a drastic squeeze as the world’s crude glut worsens, BP has warned.
“We’re going to see massive
restructuring,” Bob Dudley, chief executive, said. “The North Sea is a very
high cost basin and it is going to be a painful adjustment.”
Mr Dudley told the IHS CERAweek
forum in Houston, Texas, that the latest tax cuts in the Budget will help
margins but do not go far enough to avert a bloodbath for smaller drillers and
exploration companies.
The warning follows a study by
the International Monetary Fund showing that the UK’s oil and gas industry has
the highest cost structure of any major region in the world - if taxes are
included - and is the most vulnerable to a prolonged downturn.
Mr Dudley said there is little
chance of a revival in crude prices for a long time given the “remarkable
resilience” of US shale producers, who have defied predictions of collapse and
continue to drill record volumes.
The US rig count has plummeted
from more than 1,600 in November to 734 this week, yet this has not led a cut
in output due to rising efficiency and a shift in drilling tactics.
“It’ll level off, but for now
we’ve quite a bit of surplus oil. There could be unintended consequences for
the world in terms of stress,” Mr Dudley said, alluding to a possible wave of
bankruptcies.
----He compared the
current dynamics in the global oil market to the glut in 1986, which took
several years to clear. While big projects in the North Sea are still viable at
today’s prices near $60, the area risks relentless decline.
More
"We
pay the debts of the last generation, by issuing bonds payable by the
next generation."
Dr.
Laurence J. Peter, author, The Peter Principal.
At the Comex silver
depositories Tuesday final figures were: Registered 62.64 Moz, Eligible 112.52
Moz, Total 175.16 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, so you really want to gamble in US stocks.
How likely is this explanation to be reality after all the lies put out earlier
by the exchanges and the authorities in earlier explanations. High Frequency
Trading is front running theft, period. In this old dinosaur’s day in the 60s,
70, 80s and early 90s, front running was treated as theft and people went to
jail for it. After “Bubbles” Greenspan screwed up the bond market in early 1994
collapsing Orange County CA among others, all too quickly followed by LTCM a
few years later, the Fed and others tossed out all rules for Wall Street’s
Vampire Squids, and Ebenezer Squid and the gang set out on serious larceny. And
serious larceny is still what prevails today.
"The London
Banker Henry Fauntleroy forged to keep his bank solvent. He was executed for it
in 1824."
Charles
P. Kindleberger, author Manias, Panics and Crashes.
Mystery Trader Armed With Algorithms Rewrites Flash Crash Story
3:52 AM BST April
22, 2015
From a modest stucco house in
suburban west London, where jetliners roar overhead on their approach to
Heathrow Airport, a small-time trader was about to play a hand in one of the
most harrowing moments in Wall Street history.
Navinder Singh Sarao was as
anonymous as they come -- little more than a day trader by the standards of the
Street.
But on that spring day five years
ago, U.S. authorities now say, Sarao helped send the Dow Jones Industrial
Average on the wild, 1,000-point ride that the world came to know as the flash
crash. By regulators’ account, he was responsible for a stunning one out of
five sell orders during the frenzy.
On Tuesday, he was arrested by Scotland
Yard and charged in the U.S. with 22 criminal counts, including fraud and
market manipulation.
The news left many grasping for
answers. Sarao, 36, has no record of having worked at a major financial firm in
the U.S. or the U.K. At the time of the flash crash, Sarao was renting space
from a proprietary-trading firm in the City of London and clearing his
transactions through MF Global Holdings Ltd., the now-defunct firm headed by
Jon Corzine, said a person with knowledge of the matter. One of Sarao’s
neighbors in Hounslow, 11 miles from central London, said what neighbors so
often say: He was quiet, kept to himself, never caused trouble.
That picture, according to U.S. authorities, belies a years-long history of lightening-quick computer trading that netted Sarao $40 million in illicit profits. Sarao couldn’t be reached for comment Tuesday and U.S. authorities said they didn’t know whether he had retained a lawyer.
Sarao didn’t cause the flash crash single-handedly, authorities say. Nonetheless, Tuesday’s developments fly in the face of the prevailing narratives of what happened. Regulators initially concluded that a mutual fund company -- said to be Waddell & Reed Financial Inc. of Overland Park, Kansas -- played a leading role. Many in the industry countered that a confluence of several forces, including high-frequency trading, was probably behind the crash.
By all accounts, the flash crash was more than a mere technical glitch. It raised fundamental questions about how vulnerable today’s complex financial markets are to the high-speed, computer-driven trading that has come to dominate the marketplace.
----According to U.S. authorities, Sarao spent the past six years thumbing his nose at regulators while using software designed to manipulate markets. In addition to fraud and manipulation, he was charged with spoofing -- an illegal practice that involves placing orders with the intent to cancel before they’re executed.
In May 2010, Sarao’s actions created imbalances in the derivatives market that then spilled over to stock markets, exacerbating the flash crash, according to the CFTC.
“We do believe and intend to show that his conduct was at least significantly responsible for the order imbalance that in turn was one of the conditions that led to the flash crash,” Aitan Goelman, the CFTC’s director of enforcement, told reporters Tuesday.
----In the year leading up to the flash crash, Sarao popped up on regulators’ radar. Exchanges in the U.S. and Europe saw he was routinely placing and then quickly canceling large volumes of orders, according to an FBI affidavit unsealed Tuesday by a federal court in Illinois.
The CME Group Inc., which operates an exchange for one of the most common derivatives tied to the S&P 500, contacted Sarao about his trades after concluding that some of his activities appeared to have had a significant impact on opening prices.
Sarao explained some of his conduct to the CME in a March 2010 e-mail, as “just showing a friend of mine what occurs on the bid side of the market almost 24 hours a day, by the high-frequency geeks.” He then questioned whether CME’s actions regarding his activity meant “the mass manipulation of high frequency nerds is going to end,” according to the FBI affidavit.
On May 6, 2010, the day of the flash crash, CME sent Sarao another message. All orders to CME’s electronic exchange were to be “entered in good faith for the purpose of executing bona fide transactions,” CME said, according to the FBI affidavit.
That same day, Sarao and his firm, Nav Sarao Futures Limited Plc, used “layering” and “spoofing” algorithms to trade thousands of futures S&P 500 E-mini contracts. The orders amounted to about $200 million worth of bets that the market would fall, a trade that represented between 20 percent and 29 percent of all sell orders at the time. The orders were then replaced or modified 19,000 times before being canceled in the afternoon.
More
Spreadsheet and Gumption Were All U.K. Trader Needed to Rig Market
12:54 AM BST April 22, 2015
It only took a spreadsheet souped up with custom enhancements to manipulate
one of the world’s biggest markets with a strategy that on some days involved
trading billions of dollars’ worth of stock-futures contracts.According to the U.S. Justice Department, London trader Navinder Singh Sarao earned $40 million from 2010 to 2014. His product of choice: CME Group Inc.’s E-mini futures on the Standard & Poor’s 500 Index, the key measure of U.S. stock prices. He traded so much, the U.S. government says, that he contributed to the flash crash of May 6, 2010, that briefly drove shares into a nosedive that erased nearly $1 trillion in value.
Sarao, according to the complaint filed in a Chicago court Tuesday, used strategies known as spoofing and layering -- putting in fake orders to drive prices in a favorable direction -- to manipulate trading on CME’s Globex market, one of the most important in the world. He would pin his manipulative quotes just above or below current prices to trick other market participants into thinking futures were poised to move. Sarao allegedly posted those orders with no intention of executing them.
“With the aid of an automated trading program, Sarao was able to all but eliminate his risk of unintentionally executing these orders by modifying and ultimately canceling them before execution,” the Justice Department said in its complaint. “Meanwhile, he exploited his manipulation to reap large trading profits by executing other, real orders.”
Once the weight of his offers began pushing the price, he would trade futures to profit. If the plan was to drive the contracts lower, he’d sell futures contracts and buy them back at a slightly lower price. When he stopped his technique, which led to the price rising, he’d repeatedly buy contracts and sell them at slightly higher prices, according to the complaint.
More
Solar Update.
With events
happening fast in the development of solar power, I’ve decided to create a new
section. Updates as they get reported.
'Mega' floating solar power plants open in Japan
21 April 15 by Liat Clark
Two floating solar power plants capable of
providing electricity for 1,000 homes have been completed in Japan.
Solar power is booming in Japan; the nation
doubled its solar power capacity within two years of the
2011 Fukushima
nuclear disaster, and is now a world leader along
with China and the US. While physicists continue to work on floating nuclear power plant designs, which would use
ocean water to cool the reactor in the event of an emergency, in the meantime
floating solar power plants are having a moment in the sun.
The latest such "mega-plants" at
Nishihira and Higashihira Ponds in Kato City are the work of electronics
giant Kyocera Corporation and Century Tokyo Leasing
Corporation, and took just seven months to install. The plant's 11,250
modules are expected to generate 3,300 megawatt hours
(MWh) every year.
According to Kyocera, besides being typhoon-proof (due to their sturdy, high-density polyethylene and array design) floating solar plants are superior to their land-based equivalents because of the cooling effect of the water, which allows them to function more efficiently. Reservoirs are also an ideal location because the panels produce shade, which reduces water evaporation and promotes algae growth. A report by Korea Water Resources Corporation found that the lower temperatures of the floating modules mean they are 11 percent more efficient than land-based equivalents.
More
"I
never think of the future. It comes soon enough."
Albert
Einstein
The monthly Coppock Indicators finished March
DJIA: +118 Down. NASDAQ: +209 Down. SP500: +161 Down.
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