Bond
Issues From Russia and Ecuador Serve as Cautionary Tales for Junk-Rated Debt - (www.nytimes.com) If David
Letterman did a top 10 list for dubious bond
investments, a case might be made for including two fast imploding issues from
Ecuador and Russia. The euphoria for junk bonds from emerging market economies,
fueled by rock-bottom interest rates in the United States, Japan and Europe,
has offered up any number of fallen angels, from OGX, the bankrupt Brazilian
energy firm, to a spate of Mexican home builders. But, in many ways, a $600
million bond issue by a Russian train company in 2012 and, two years later, a
$2 billion offering by the government of Ecuador, serve as cautionary bookends
for high-yield bond segment, even though it shows no sign of ending anytime
soon. When Brunswick Rail, Russia’s largest private-sector train company, offered $600
million worth of bonds to global investors in 2012, the deal was a blowout.
More than $3 billion in demand came from yield-starved global investors. Oil
prices were high and Russian railroads were seen as a good growth play,
notwithstanding the competition the company faced from state owned firms and
the fact that Brunswick was borrowing in dollars and getting a good chunk of
its revenues in rubles.
Major
dry bulk carriers finish 2014 at standstill – (www.shippingwatch.com) Spot rates for
the major benchmark Capesize vessels continue to slide, and the ships are
seeing very low activity in the Pacific and virtually none on the Atlantic. "Rates
are falling further and further below Opex and decreased on Wednesday to USD
4,109 per day. Panamax is also quiet, and many owners are eager to sign
contracts, which pulls the the rates down," said Fearnley on Thursday. According
to analysts Platou, charter earnings for Capesize stand at USD 5,400 per day -
below operating costs, which typically come to USD 6,500 per day for a newer
vessel. It is unusually difficult to predict the future bulk market at this
time, says Platou, citing developments in China with the country's reduced
consumption and lower coal imports, developments that have hit dry bulk in
2014. And there is a big chance that next year will bring similar developments
if Chinese politicians continue to favor their own domestic industry to the
detriment of overseas suppliers.
Norway's
oil sector faces tougher times as prices fall - (www.dailymail.co.uk) Norway's oil sector is facing difficult times
and energy investment forecasts may have to be cut further if prices continue
to drop, central bank governor Oeystein Olsen said on Thursday. Prices have
fallen to a 28-month low, hitting the Nordic country's vast oil industry, which
accounts for a fifth of the economy and half of its exports. Oil and gas
investments are expected to fall by 10 percent next year on investor demands
for higher returns and a drop in oil prices. "If the oil price continues
to drop, it will eventually reach a point where we'll have to reconsider our
estimates for future (oil industry) investments," Olsen told reporters
after a speech to business leaders. A weak PMI reading released Wednesday adds
to the worries, on top of a steady stream of projects delays, cancellations and
layoffs in the oil sector. The Norwegian purchasing managers' index (PMI) fell
to 49.4 points in September from 51.8 in August. Analysts polled by Reuters had
expected the index to fall to 51.0.
"Houston,
You Have A Problem" - Texas Is Headed For A Recession Due To Oil Crash,
JPM Warns - (www.zerohedge.com) It was back in August 2013, when there was nothing but clear skies ahead
of the US shale industry that we asked "How Much Is Oil Supporting U.S.
Employment Gains?" The answer we gave: The American Petroleum Institute
said last week the U.S. oil and natural gas sector was an engine driving job
growth.Eight percent of the U.S. economy is supported by the
energy sector, the industry's lobbying group said, up from the 7.7 percent
recorded the last time the API examined the issue. The employment assessment
came as the Energy Department said oil and gas production continued to make
gains across the board. With the right energy policies in place, API said the
economy could grow even more. But with oil and gas production already
at record levels, the narrative over the jobs prospects may be failing on its
own accord.... The API's report said each of the direct jobs in the
oil and natural gas industry translated to 2.8 jobs in other sectors of the
U.S. economy. That in turn translates to a total impact on U.S.
gross domestic product of $1.2 trillion, the study found. Fast forward to today when we are about to learn that Newton's third law
of Keynesian economics states that every boom, has an equal and opposite bust. Which brings us
to Texas, the one state that more than any other, has benefited over the past 5
years from the Shale miracle. And now with crude sinking by the day, it is time
to unwind all those gains, and give back all those jobs. Did we mention: highly
compensated, very well-paying jobs,not the restaurant,
clerical, waiter, retail, part-time minimum-wage jobs the "recovery"
has been flooded with. Here is JPM's Michael Feroli explaining why Houston
suddenly has a very big problem.
How
a freight bill went from $5,000 to $68,000 - (www.cnbc.com) There are 620
cycling trainers stuck in Long Beach, California. They spent close to five days
stuck on a boat outside of the port. When the container they were in was
finally unloaded off the ship, it was parked in a rail transfer yard for two
days. At this publication time, they are still there. The cycles were supposed
to be in Atlanta on Wednesday. Given the delay there was no way the equipment,
already pre-sold to customers, would make it to their destinations by
Christmas. So the importer, Wahoo Fitness, loaded another 620 of its training cycles,
called KICKRs and retailing for about $1,100 each, onto an airplane and flew
them over from Asia. It cost $68,000. The ocean freight bill is typically
between $3,000-$5,000. "It will reduce our gross margin by a third to a
half," said Mike Stashak, vice president of sales and marketing at Wahoo,
in an interview. "We're still making money off it, but not a whole
lot."
GM,
Audi Suspend Car Sales in Russia on Ruble’s Collapse - (www.bloomberg.com)
Bankers See $1 Trillion of Investments Stranded in the Oil Fields - (www.bloomberg.com)
Bankers See $1 Trillion of Investments Stranded in the Oil Fields - (www.bloomberg.com)
China
is Planning to Purge Foreign Technology and Replace With Homegrown Suppliers
- (www.bloomberg.com)
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