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Last Two Times This Happened, Stocks Crashed

June 2, 2015

Last Two Times This Happened, Stocks Crashed

Global growth is languishing, corporate revenues too, but CEOs are trying to show they can grow their companies the quick and easy way. Cheap debt is sloshing through the system while yield-hungry investors offer their first-born to earn 5%. And this cheap debt along with vertigo-inducing stock valuations have created the largest M&A boom the US has ever seen, with May setting an all-time record.

There may be a sense of desperation among CEOs as the Fed’s cacophony evokes interest rate increases, the first since July 2006. So companies are issuing all kinds of cheap debt while they still can. Bond issuance has totaled over $100 billion per monthin the US for the past four months, the longest such streak ever, according to Bank of America Merrill Lynch.

And that record issuance doesn’t account for the booming “reverse Yankee issuance,” where US corporations take advantage of the negative-yield absurdity Draghi has concocted in Europe and issue euro-denominated bonds into European markets.

“Issuers should realize that the window to lock in low long-term yields for any purpose is closing,” Hans Mikkelsen, a senior strategist at BofA, wrote in a note, according to theFinancial Times. And so in May, M&A deals hit an all-time record of $243 billion.

US-M+A-record-months-May-2015-May-2007-Jan-2000

The prior two record months: May 2007 ($226 billion) and January 2000 ($213 billion). Not long after those records were set, markets crashed with spectacular results.

May included Charter’s $90-billion acquisition of Time Warner Cable and Bright House. Charter will issue around $30 billion in junk-rated debt to accomplish this, likely the second largest junk-debt deal ever, behind that of TXU in October 2007, which is now in bankruptcy [read… Junk-Debt Apocalypse Later].

May also includes Avago’s $37-billion acquisition of Broadcom, the largest tech deal since the dotcom bubble blew up.

 

…click on the above link to read the rest of the article…

The puzzling flattening of carbon emissions and the problem of global growth

March 30, 2015

The puzzling flattening of carbon emissions and the problem of global growth

Last week we learned that maybe, just maybe, global carbon emissions were flat in 2014 even though the global economy supposedly grew by 3 percent. As Brad Plumer of Vox (whose work I greatly respect) points out, carbon emissions have moved up almost in lockstep with economic growth for the entire industrial age except during recessions and one year of growth 40 years ago.

This is why I use “supposedly” when referring to the global economic growth number. It’s because there is another obvious and plausible explanation for the flat carbon emissions, namely, that the global economy did not grow by the stated percentage, that it may have grown only a fraction of that amount or not at all.

Economic measures are constantly being revised, and I think it is very likely that the global economic growth number for 2014 will be revised downward. Probably not to zero, but downward nonetheless. It’s also possible that estimates of carbon emissions are too low. Plumer cites “notoriously unreliable” Chinese emission numbers as one reason to be skeptical.

But, even if 2014 turns out to be a year of growth without rising emissions, we shouldn’t get particularly exercised. Nor should we be particularly excited if it continues for a time. This is because the only trend that will actually address climate change is a RAPID DECLINE in worldwide emissions (as Plumer rightly points out).

…click on the above link to read the rest of the article…

 

 

 

It’s Official: Global Economy Back In Contraction For First Time Since 2012 According To Goldman

February 20, 2015

It’s Official: Global Economy Back In Contraction For First Time Since 2012 According To Goldman

After spending the past year deteriorating with each passing month, as global acceleration dipped decidedly in the negative camp, the only thing that kept the Goldman Global Leading Indicator “swirlogram” somewhat buoyant was that “Growth” measured in absolute terms had remained slightly positive. Not any more: according to Goldman’s latest global economic read, the world is now officially in contraction, following a sharp plunge in both acceleration and growth in February.

As the far simpler 2-D chart below shows, the Goldman GLI mometum indicator is now below 0 for the first time since 2012. It also shows what the momentum of the Global Leading Indicator looks like compared to Global industrial production, which is sure to follow below the X-axis in the coming weeks.

What is causing it? Pretty much everything except Initial Claims in the US (which are great for everyone, except the shale states – expect the weakness seen there to spread everywhere in the coming months).

…click on the above link to read the rest of the article…

 

Cheaper oil will not boost global growth, says Moody’s

February 11, 2015

Cheaper oil will not boost global growth, says Moody’s

Lower oil prices will fail to give a “significant boost” to global growth in the next two years, Moody’s has said.

The ratings agency said any boost from cheaper oil would be offset by the eurozone’s economic woes as well as slowdowns in China, Japan and Russia.

As a result, Moody’s said it would not be revising its growth forecasts for the G20 countries.

“For the G20 economies, we expect GDP growth of just under 3% each year in 2015 and 2016.”

This was unchanged from 2014 and from its previous forecast, Moody’s said.

Marie Diron, the author of the report, said: “Lower oil prices should, in principle, give a significant boost to global growth.

“However, a range of factors will offset the windfall income gains from cheaper energy.

“In the euro area, the fall in oil prices takes place in an unfavourable economic climate, with high unemployment, low or negative inflation and resurgent political uncertainty in some countries.”

 

…click on the above link to read the rest of the article…

The Only Road Out Of Davos

January 20, 2015

The Only Road Out Of Davos

After 6+ (BIG +) years of deepening poverty and rising stock markets, of creative accounting, of QE and ultralow interest rates, of extend and pretend and outright propaganda and of what have you, all of which have led us to where we are today, facing yet more rounds of stumbling from crisis into multiple crises, it would seem clear that the model, if not the mold, is broken. In order to fix it, let alone replace it altogether, we need to understand to what extent it is broken. And to do that, we first need to know what exactly the model is.

Now, it would be tempting, even seem logical, to consult with the people who designed and built the model. Who, after all, not only claim to be the only ones capable of fixing the broken mold, but who also have occupied all positions of power that have any say in the process. But that’s less obvious than it may seem. Because, mind you, the model is broken. They built a flawed model. Or rather, they built one that works for them, for some, but not for the rest of us.

There are gatherings and festivities ongoing in Davos. Only some are invited: the rich, the powerful and their court jesters. Those who profited most from the broken model. They’re least likely to fix it, they won’t even admit to it being broken. It works just fine for them. The people in Davos believe in one model only, the one of ever increasing centralization and globalization, because that’s the model that got them where they are.

That means that what’s in their interest is 180º removed from what’s in your interest. And it means that whatever these people propose you do, you should probably do the exact opposite.

…click on the above link to read the rest of the article…

 

The PunchLine: “The Oil Crash Is No Small Matter…Repurcussions Will Be Extensive”

January 19, 2015

The PunchLine: “The Oil Crash Is No Small Matter…Repurcussions Will Be Extensive”

Awkward Beginnings… With all due respect…

What a way to start the year. The crash in oil prices is no small matter. The previous down sweep in energy prices occurred in the midst of the financial crash 0f 2008 and Great Recession. Oil prices soon reversed afterwards and climbed back to dizzying heights, even as world economic and financial recovery remained fragile. This time it would be foolish to bet solely on such a similarly quick snapback. The current bear market for oil may actually be the beginning of a longer and extended period of low commodity prices…

First, the price of oil at $100/bl or above had been an absurdity.

Second, many nations simply cannot afford to curtail pumping oil, even at a loss in the short run.

Third, global growth is proving to be woefully inadequate and uncertain. Even as growth in the U.S. economy is becoming more firmly entrenched, the rest of the major economic engines remain mired, as we have argued for some time, in subpar growth trajectories. The Euro area may be facing another soft patch and remains entangled in both economic and geopolitical crises. The recovery in Japan has been slower than expected. And China continues to grow well below its previous super- track; and it obviously faces headwinds from a volatile real estate sector, awkward debt buildups and massive stockpiles of high-priced commodities.

Fourth, the shale gas revolution has transformed America’s energy markets, with profound effects for economic growth, competitiveness, security, and environmental quality. And the extensiveness of the oil rush in America is also playing a big role in pushing the adjustment on prices.

…click on the above link to read the rest of the article…

 

 

WEALTH CREATION AND THE NEW ENERGY ECONOMY

January 6, 2015

WEALTH CREATION AND THE NEW ENERGY ECONOMY

Looking at the markets from a 30,000 foot level, some interesting shifts are occurring. And yet they are almost completely under the radar screen. While many in the oil and gas industry make comments that the renewable energy markets are not sufficiently mature for the world to transition, it is interesting to note that that may not be the case at all. A recent report issued by Bloomberg New Energy Finance makes some interesting prognostications. Bloomberg states:

“By 2030, the world’s power mix will have transformed: from today’s system with two-thirds fossil fuels to one with over half from zero-emission energy sources. Renewables will command over 60% of the 5,579GW of new capacity and 65% of the $7.7 trillion of power investment.”

And that is without much shift in current policy to incentivize renewable production. If countries were to get serious about climate change, these figures could presumably be accelerated. In fact, Bloomberg states that most of this global growth will be driven by economics rather than policy. Costs are falling quickly and the financial markets are becoming more comfortable with the investment profiles. That means that we don’t have to rely completely on political will. But even in this arena, all is not lost.

The World Bank issued a report on global carbon pricing in May, 2014 which stated:

…click on the above link to read the rest of the article…

 

The end of global development as we know it | News | Engineering for Change

December 4, 2014

The end of global development as we know it | News | Engineering for Change.

Development professionals do their work under the assumption that the developing world will some day look a lot like the developed world. But there’s a good chance that they’re wrong. A practical look at the world’s energy supply, and interesting new research into the link between energy, culture and quality of life, shows that the reverse is probably true: The developed world will soon look more like the developing world. Here’s why that’s happening and what we can do to prepare for a big change right now.

From farmers to desk jockeys
Since the early 1990’s, the US government has not counted “farmers” as a category in the national census, and that is a symptom of energy consumption. Diesel fuel, chemical fertilizers and pesticides are all forms of energy that have supplanted human and animal muscle on the farm. This energy, that comes from cheap, accessible fossil fuels, has turned the agrarian serfs of the middle ages into today’s corporate, government, and academic “cubicle serfs,” in developed countries. And global development professionals are trying to shepherd the developing world along the same path.

Fossil energy has facilitated three doublings of the global population since the eighteenth century, while erecting a byzantine techno-social hierarchy in the developed world and in the power centers of the developing world.

…click on the above link to read the rest of the article…

Soaring Dollar, Plunging Oil, Crummy Global Growth | Wolf Street

November 22, 2014

Soaring Dollar, Plunging Oil, Crummy Global Growth | Wolf Street.

This chart juxtaposes the price of Brent crude oil and the US Dollar Index (the outdated currency basket composed of the euro, yen, UK pound, Canadian dollar, Swiss franc, and Swedish krona). As the dollar has soared, the price of Brent crude in dollars has plunged.

Or we might say that the euro has dropped and the yen has plunged for reasons of their own, including their central banks’ commitment to a total currency war. So the hapless consumers in Japan won’t even be able to benefit at the pump from the plunge in the price of oil, as we’re doing in the US. Thanks to the Bank of Japan’s yen-destruction policies, they have to pay for it with their rapidly shrinking yen.

It gives us a near-perfect mirror image of the price of Brent and the Dollar Index:

…click on the above link to read the rest of the article…

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