Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver Close Mixed with Stocks
By: Chris Mullen, Gold Seeker Report

The Powers-That-Be Were Everywhere Yesterday
By: Ed Steer

Gold and Silver Price Goals For Year End
By: Craig Hemke

GoldSeek Radio Nugget: Peter Schiff and Chris Waltzek
By: radio.GoldSeek.com

Gold and Global Financial Crisis Redux
By: Jim Willie CB

The Trade War Is Not The Problem With The Global Economy
By: Dave Kranzler

Gold Stock Bulls Gore The Bears
By: Stewart Thomson

Where are we now in the investor cycle?
By: Michael J. Kosares

The Amazing Story of Gold to Gold Stocks Ratios
By: Rambus

A Bad Moon Rising – Over Several Markets
By: Gary Christenson

 
Search

GoldSeek Web

 
Here Comes The Blood!!


 -- Published: Sunday, 27 September 2015 | Print  | Disqus 

By Harris Kupperman

Starting at the end of 2014, I wrote a number of pieces (There Will Be Blood!!, There Will Be Blood!! (Part II), There Will Be Blood!! (Part III), There Will Be Blood!! (Part III.V)) detailing how QE was facilitating the production of certain real assets like oil where the production decision was no longer being tied to profitability. For instance, shale producers could borrow cheaply, produce at a loss and debt investors would simply look the other way because of the attractive yields that were offered on the debt. The overriding theme of these pieces was that the eventual crack-up in the energy sector would precipitate a crisis that was much larger than the great subprime crisis of last decade as waves of shale defaults would serve as the catalyst for investors to stop reaching for yield and once again try to understand what exactly they owned.  

Fast forward 9 months from the last piece and most of these shale producers are mere shells of themselves. If you got out of the way—good for you. Amazingly, these companies can still find creative ways to tap the debt markets, stay alive and flood the market with oil. Eventually, most won’t make it and I believe that the ultimate global debt write-off is in the hundreds of billions of dollars—maybe even a trillion depending on which larger players stumble. That doesn’t even include the service companies or the employees who have their own consumer and mortgage debt.

I believe that shale producers are the "sub-prime" of this decade. As they vaporize hundreds of billions in investor capital, thus far, there has been a collective shrug as everyone ignores the obvious--until suddenly it begins to matter. By way of timelines, I think we are now getting to the early summer of 2008--suddenly the smart people are beginning to realize that something is wrong. Credit spreads are the life-line of the global financial world. They’re screaming danger. I think the equity markets are about to listen.  

HY Index

High Yield - 10 Year Spread Is Blowing Out

Then again, a few hundred billion is a rounding error in our QE world.  There is a much bigger animal and no one is talking about it yet—the petrodollar.

Roughly defined, petrodollars are the dollars earned by oil exporting countries that are either spent on goods or more often tucked away in central bank war chests or sovereign wealth funds to be invested. I’ve read dozens of research reports on the topic and depending on how its calculated, this flow of capital has averaged between $500 billion and $1 trillion per year for most of the past decade. This is money that has been going into financial assets around the world—mainly in the US. This flow of reinvested capital is now effectively shut off. Since many of these countries are now running huge budget deficits, it seems only natural that if oil stays at these prices, this flow of capital will go in reverse as countries are forced to sell foreign assets to cover these deficits.

Petrodollars

Over the past year, the carnage in the emerging markets has been severe. Barring another dose of QE, I think this carnage is about to come to the more developed world as the petrodollar flow unwinds and two decades of central bank inspired lunacy erupts.

There Will Be Blood II

http://adventuresincapitalism.com/


| Digg This Article
 -- Published: Sunday, 27 September 2015 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.