FED forced banks to save shale companies
According to informants from two independent sources Dallas FEDs met with banks’ officials. Reason? Their exposition to fracking companies’ debt. Amount of unpaid balance booked in their accounts can be as high as 18%. This is just a beginning of an avalanche. When debtor stops paying instalments bank can initiate proceedings to state that debtor is bankrupt. Bankruptcies in energy sector would alarm investors and make it harder to get capital for further operation, which already is in the deep red.
Production crash in the US then lowers supply of the crude oil and increase price of energy resources. The US policy assuming hitting Russia with cheap oil can seriously backlash and burst bubble in the corporate bond market. To prevent that the FED most probably ordered banks to hold their bankruptcy filings regarding energy companies. Creditors are supposed to receive capital through sell off of debtor assets. The FED promised to help banks in case of situation worsening i.e. banks could not get their hands on money.
Right after news was brought to light by Zerohedge central bank denied any meeting taking place nor any instructions given to banks. Question: Is it worth trusting officials of a central bank cought multiple times on a lie?
SandRidge Energy on the brink of bankruptcy
Operating and financial profit of fracking company SandRidge Energy were deemed to be insufficient to cover their obligations. Company have found capital to continue existence for few months but unless situation drastically changes bankruptcy is a fact. SandRidge Energy owes 4 bn USD. Just like mentioned above sustaining liquidity by nearly bankrupt corporation is not surprising. SandRidge exemplifies condition of the whole sector. 2015 made 40 companies from oil and gas business to go broke.
One of the biggest coal mines in the US is going bust.
The FED spreads its wings over shale sector but coal is different story. Arch Coal – second according to market capitalisation company in the US mining for coal – filed for bankruptcy. Revenue of the company was falling continuously for 13 quarters. Last unpaid interest of their debt of 90 mln USD ended operation of Arch Coal. On top of this unpaid sum firm owes 4.5 bn USD.
Arch Coal is not the only company filing for bankruptcy. Patriot Coal, Walter Energy and Alpha Natural Resources are already off the table. They amounted to 25% of coal mining sector in the US. Low prices of commodities is the obvious reason. Rest if the sector is still fighting but more insolvencies are bound to happen.
The biggest pension fund in the US bought Russian bonds.
Russian treasuries were bought for the total sum of 250 mln USD. Fund was motivated by low interest rate on the US equivalents which hardly suffice to cover loss of value by the USD (inflation). Too big risk deterred from choosing US corporate bonds. Starting with bonds it is possible that even Russian stocks may become attractive too. It seems that attempts to isolate Russia on international stage are failing on the home turf – by home investors. Very interesting will be behaviour of Russian market regarding global slump if even the US institutions choose it rather than their own country.
Dire situation in Venezuela
Venezuelan budget is able to continue only days with their reserves put aside for imports. Hyperinflation in 2015 got as high as 250% and 2016 can triple that. For now 90% profits from oil sales is used to pay the interest of international and national debt. Bond interest rates peak at 25%. Shops experience empty shelves (from rice to toilet paper). Government policy to save budget just makes situation worse. Latest invention was to introduce huge taxes against foreign companies. This resulted in them leaving this market. Month ago leader of the opposition was murdered. China can be interested in ‘helping’ Maduro (president) and taking over government debt but what they will ask in return?
Hillary Clinton mails reveals true cause behind attacking Libya
From the emails of Hillary Clinton we can read that French president Nicolas Sarkozy was the designer of this operation. Gaddafi’s gold reserves could back their plans for Gold Dinar being introduced. Competing with EUR and USD was the prime candidate to take over as top currency in Africa. West couldn’t let that happen and architected to:
- take control over Libyan oil,
- expanding French influence in the region
- lifting Sarkozy’s standing in France,
- eliminating Gaddafi and his affluence in Northern Africa,
- grabbing 140 tons of gold and equal amount of silver.
Destabilisation of the region and collateral damage of million deaths – only to promote French plot to exploit Libyan and regions resources.
Trillion USD in US bonds disappeared from the market
From August 2014 to January 2016 amount of the US public debt owned by central banks fell by 1T USD to 11T in just 17 months. The kicker is – no one is admitting to buying such amount of the US debt. If central bank is selling and prices are rising then who is buying? (yield is falling)
First suspect is the Exchange Stabilization Fund used during currency crisis international situations. Balance of the fund is confidential and thanks to that no one will now if bonds were indeed bought by them.
When in 2014 and 2015 China and others started selling US debt and against common thinking this debt’s price kept growing you could connect the dots. Someone is pulling oversupply of the US bonds from the market. FED could not do it as the only funds they could use is another QE. This would be clear enough signal to let everyone know that Washington is in deep financial troubles. Capital flight quickly snowballing into avalanche of bankruptcies in nearly every single part of the economy – bad outlook. When the FED raise interest rates acting like nothing happens the ESF saves the day.
War on cash is continuing
January 2016 is the moment when Norwegian bank DNB joined the fight. Officials of this institution call for total ban on paper money and switch exclusively to electronic money. We can hear this kind of proclamations from every corner of the world. Historically low interest rates push capital out of banks. Clients picks cash over deposits as they do not get any interest holding money in the bank. Even if this negligible amount is bigger than nothing it does not compensate the risk of bank bankruptcy.
China is also heard in this choir. The PBC creates his electronic currency to stop capital flight. After recent depreciations of yuan it is getting hard to keep financial means in home banking system. Investors and speculators are afraid of increasing financial tensions. Manipulation of stock exchange and ever cheaper yuan.
Why politicians and banksters need cashless money:
- minimising risk of a bank run and capital itself will be circulating in the banking system only,
- every transaction is easier to tax and take provision of,
- in the event of negative interest rates people are left with consumption only, risky investments or guaranteed loss of capital,
- easier to control society when all money it requires to function are under government control.
Ex-president of the FED admits that he co-created stock market bubble
Richard Fisher, former president of Dallas FED during interview with CNBC spilled the beans. He broke official propaganda line of ‘experts’ shifting blame for inflating bubbles to China. In fact he said that it was the Federal Reserve Bank doing that and also for the “Wealth Effect”. Mechanism in theory makes people spend money eagerly and get more credit when society feels wealthy. Obviously no one cares that majority of Americans are now poorer due to policies of central bank. Moreover, he added that the FED is gigantic weapon but it had used all its ammunition. This is not fully true as QE is always there for politicians. Maybe now it is obvious enough that it will be bad for the economy?
Indian banks take over gold of citizens
Last year I wrote about an idea of Indian government to take gold from their people. Attempting to make their fellow men to deposit their gold in exchange for interest rates paid. Today we know details of this plan. There are four stages of this mechanism:
1. Client brings his metal and ‘deposit’ it in a bank.
2. In return he gets rupees (interest rates).
3. Gold taken over is sold to mints and jeweller’s.
4. Client buys his goods again.
According to designers precious metals should circulate non-stop in bank-mint system for a small fee (interest rates). Clients depositing gold can say farewells as they will not see it anymore and coupons given back in ever inflating currency is hardly a win-win. Fortunately the demand for such a disservice is very low. In case this consensual option does not work we can see nationalisation of savings – of course because of ‘emergency’, ‘saving country’ or other excuse.
Saudis are dropping British bombs on Yemenis
Saudi Arabia attacks Yemen for six months already. Bombed are not only military installations but also civilian targets. To this date 10 thousand people lost their lives and 2.5 mln Yemenis are running form the country. Mainly as a result of famine. Over 90% goods required to live is imported. 13 mln people started experience lack of food and soon death from hunger will top other causes of death. As one of the Red Cross officials said: “Yemen after 5 months looks like Syria after 5 years”.
On the ones side the UK government condemns wars in the Middle-East but on the other arms deals with Saudis tripled. Those weapons end up also in ISIS hands. Right now Riyadh air force is made 50% of the UK made jets. Breaking one’s law against arms deals means nothing. Everything is happening when Europe is flooded by immigrants and refugees from Africa and Middle-East.
Comex has only 2 tons of physical gold left.
Comex, American exchange of precious metals, is used mainly through futures contracts. Although client is entitled to require physical collateral rather than price paid in dollars it is only a theory. In practice Comex’s ability to cover contracts in gold is limited to 74 thousand oz. This can cover only 740 out of approximately 400,000 contracts! For every deliverable ounce of gold there are 543 ‘paper’ ounces. This is historical precedent. Physical metal cannot be printed out, not like paper supplied during QEs. Institutions responsible for manipulation of gold prices have hard nut to crack. Holding prices down makes the demand for mint production higher; in turn if mints relax control over price the institutional clients can be interested. This group can drain JP Morgan reserves in a minute.
Worth noting is fact that since interest rates of debt in the Eurozone countries records its all-time minimums prices of silver started to fall rapidly. In under one year amount of registered silver was halved. Precious metals market is nearing its apogee with every second. Question of not ‘if’ but ‘when’ reserves will be gone we will see bad things happening.
Source: Comex, Zerohedge.com
Independent Trader Team