Remember the mass layoffs of 2008-2009? The US economy shed millions of jobs quickly and relentlessly, as companies died and the rest fought for survival.
Then the Fed and the US government flooded the banks and the corporate sector with bailouts and handouts. With those giga-tons of liquidity sloshing around, as well as taking on massive amounts of new cheap debt, companies were able to finance their working capital needs, hire workers back, and even buy-back their shares en mass to make themselves look deceptively profitable. The nightmare of 2008 soon became a golden era of ‘recovery’.
Well, 2016 is showing us that that era is over. And as stock prices cease to rise, and in fact fall within many industries, layoffs are beginning to make a return as companies jettison costs in attempt to reduce losses. Continue reading
Big banks are cringing as crude oil is crumbling.
Now that the oil glut has caused prices to crash below $30 a barrel, turmoil is rippling through the energy industry and souring many of those loans. Dozens of oil companies have gone bankrupt and the ones that haven’t are feeling enough financial stress to slash spending and cut tens of thousands of jobs.
With a $4tn mountain of debt maturing over the next five years, corporate America’s reliance on cheap cash is about to get tested.
With the prospect of steadily higher interest rates in the coming years as the Federal Reserve gradually tightens policy, US companies that tapped global markets for inexpensive finance over the past four years will soon face a different environment.
But as rates turn higher, investors may see the flip side of cheap financing. Analysts warn companies will begin defaulting in greater numbers, particularly in the energy sector, which has found itself in the line of fire as commodity prices languish. Continue reading
Oil prices continue to fluctuate in a relatively narrow band around $50 for WTI and $60 for Brent. On March 6, Baker Hughes reported another round of declining rig counts. Only this week the pace of cutbacks accelerated. An estimated 75 rigs were removed from the oil patch for the week ending on March 6, a big jump from a week earlier. It is important to remember that week-to-week numbers are largely statistical noise; the long-term trend line is more important. Still, after several weeks in which the rig count collapse appeared to be slowing, last week’s figures are a reminder that the rout is not over yet. After all, production has not dropped off – U.S. production surpassed 9.3 million barrels of oil per day in February, the highest level in decades. Continue reading
(Reuters) – DoubleLine Capital’s Jeffrey Gundlach said on Tuesday there is a possibility of a “true collapse” in U.S. capital expenditures and hiring if the price of oil stays at its current level.
Gundlach, who correctly predicted government bond yields would plunge in 2014, said on his annual outlook webcast that 35 percent of Standard & Poor’s capital expenditures comes from the energy sector and if oil remains around the $45-plus level or drops further, growth in capital expenditures could likely “fall to zero.”
Gundlach, the co-founder of Los Angeles-based DoubleLine, which oversees $64 billion in assets, noted that “all of the job growth in the (economic) recovery can be attributed to the shale renaissance.” He added that if low oil prices remain, the U.S. could see a wave of bankruptcies from some leveraged energy companies. Continue reading
Although a great article, the author seems to whitewash the intentions behind China’s global military expansion as if it won’t be a threat. It seems to be strangely forgotten how the United States started going global: Protecting its economic and political interests. Though it’s gone wayward the last few years, the U.S. had well-intended interests and goals in mind whereas the Chinese don’t and never did. You can tell by looking at its own domestic affairs and how it handles them — the crackdown on the current civil unrest in Hong Kong or its infamous Tiananmen Square murder. However, you can decide for yourself who would be better in leading the world.
The burgeoning need to protect commercial assets and Chinese nationals abroad will inevitably lead Beijing to develop new military capabilities and take on missions further afield.
THE CHINESE armed forces are on the move—but to where? For over a decade, academics, policy wonks and government officials have been engaged in a relentless debate about Beijing’s military capabilities and intentions. To some, China is an expansionist country akin to Wilhelmine Germany. Others argue that while China’s assertive behavior in its regional island disputes is disconcerting, the Chinese Communist Party (CCP) is completely focused on domestic stability and therefore lacks global ambition.
This debate about current Chinese capabilities and intentions is widespread, fervent—and beside the point. While the Chinese leadership would prefer to stay focused on internal development and regional issues, facts on the ground will increasingly compel the CCP to develop some global operational capabilities. Specifically, the burgeoning need to protect commercial assets and Chinese nationals abroad will lead the country to develop some global power-projection capabilities, regardless of its current plans. Even though the Chinese leadership will embark on this path with very limited goals in mind, Chinese thinking on how and when to use force could change once its strategy, doctrine and capabilities evolve to incorporate these new roles. Continue reading
A recent trip made by Chinese premier Li Keqiang to Russia and Germany reflects the country’s new foreign policy under President Xi Jinping, who aims to push for closer ties with the two countries, China Business News reports.
Germany and China, recently established a comprehensive economic partnership following Xi’s visit to Europe’s largest economy earlier this year, the newspaper said. During premier Li’s visit ton Germany last week, the two countries signed over 100 agreements, including some on intellectual property protections, an issue Germany has had with China for some time, thus moving their relationship forward.
Russian press reports that the country’s Ministry of Finance is ready to greenlight a plan to radically increase the role of the Russian ruble in export operations while reducing the share of dollar-denominated transactions. Governmental sources believe that the Russian banking sector is “ready to handle the increased number of ruble-denominated transactions”.
According to the Prime news agency, on April 24th the government organized a special meeting dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia. Continue reading
Big changes are already underway in the global energy sector. And some of these changes are contrary to previous expectations. What we now realize, once again, is that capitalism works. Capitalism has always solved our most basic problems. Even now it is solving our energy problem.
Four years ago Russia was the rising powerhouse of global energy production. Marshall I. Goldman’s 2008 book on Russia was titled Petrostate: Putin, Power and the New Russia. As Goldman explained, “Russia … finds itself in a newly assertive, even dominant, international position. Its emergence as a new super energy power overlaps with the weakening of the United States as we have squandered our … resources in Iraq.” But Russia’s energy sector has always been a state-manipulated behemoth with serious problems of its own. Continue reading
Time and time again, history has proven that third-world economies have no bottom, no matter the amount or severity of sanctions. So long as China and Russia keep backing the Iranian regime, and as long as energy resources are in high demand world-wide, they will likely never be stopped without resorting to war.
WASHINGTON — The United States has determined that the Islamic
Revolutionary Guard Corps was directing Iran’s state-owned oil sector.
The U.S. Treasury Departrment said the state-owned National Iranian Oil Co. was controlled by IRGC, which was helping the firm bypass international sanctions on Teheran’s energy sector.
Treasury said IRGC was increasing its control over National Iranian Oil as the elite military sought clients for Iran’s sanctioned crude oil exports.
“Under the current Iranian regime, the IRGC’s influence has grown within NIOC,” Treasury said on Sept. 24.
Full article: Iran’s elite commando force running oil sector, bypassing sanctions (World Tribune)
Analysts and diplomats assert that the Saudi royal family has been
frustrated by the U.S. hesitation to stop Iran. They cited the refusal by
the administration of President Barack Obama to sign tough sanctions
legislation that targeted Iran’s energy sector.
“The Gulf states are definitely taking a stronger stance against Iran
and are using their considerable influence to try to convince others of
their Iranian fears,” Theodore Karasik, an analyst at the Institute for Near
East and Gulf Military Analysis in the United Arab Emirates, said.
Currently, the GCC, led by the Saudis, were engaged in a massive
military buildup. Riyad has ordered about $30 billion worth of fighter-jets
and munitions from the United States while the UAE was expected to purchase
another $20 billion from Washington.
Continue reading article: Saudis seek new security allies, sign nuclear agreement with China (World Tribune)