Tuesday, September 1, 2015

Wednesday September 2 Housing and Economic stories


The rug has been pulled out from under Latin America - (www.businessinsider.com) But the boom times are over. Latin America is getting hit with a double whammy: the collapse in commodity prices and the sudden economic turmoil in China. Low oil prices are hurting Latin America’s exporters. Mexico’s state-owned oil company Pemex has already slashed its budget for the year, cutting spending from $27.3 billion to $23.5 billion. Pemex has also borne the brunt of government spending cutbacks. And the much-anticipated first auction of Mexico’s offshore oil resources following a historic liberalization of its energy sector produced disappointing results, as low oil prices scared away bidders. Brazil has fared worse. Compounded by a colossal corruption scandal, Brazil’s Petrobras is drowning in debt as oil prices have plummeted. In late June, Petrobras announced it would slash spending by one-third, divest itself of billions of dollars in assets, and it lowered its long-term oil production target to just 2.8 million barrels per day (mb/d) by 2020, down from a previous target of 4 mb/d.

Junk-Rated Offshore Drillers Headed into Bankruptcy: Fitch - (www.wolfstreet.com) At the leading edge is rig-contractor Hercules Offshore. In March 2014, before the oil price collapsed, it had the temerity to sell for 100 cents on the dollar $300 million in junk bonds. Since then, its shares have collapsed to near zero. Its bonds have collapsed too. And on Thursday last week, it and a whole gaggle of related companies filed for Chapter 11 bankruptcy. It won’t be the only junk-rated offshore driller with that fate, according to Fitch Ratings. Investors are going to get their pockets cleaned. “This is the lowest level of demand we have seen since the early days of the offshore industry,” Hercules CEO John Rynd had told investors in a quarterly conference call on April 29. Hercules had already cut its global workforce – about 1,800 employees at the end of 2014 – by nearly 40%, he said. Offshore drillers have been buffeted from two directions: the collapse of drilling activity and the collapse in the daily rates they can charge for their offshore drilling rigs. So fewer rigs, and less money for each of the fewer rigs: Hercules’ revenues in the second quarter plunged 67% from a year ago!

Emerging market turmoil spreads to western stock markets – (www.ft.com) The US stock market slid by the most since February 2014 on Thursday, wiping out all of this year’s gains to trade at a six-month low, as the deepening emerging markets turmoil triggered by the commodity slide and China’s devaluation rattled global bourses. With many developing countries benefiting from China’s voracious demand for commodities in recent years, last week’s devaluation of the renminbi has increased concern that a primary engine of the global economy is spluttering. The shift towards more flexible exchange rates in countries such as Kazakhstan and Vietnam underscores how China’s devaluation has ratcheted up pressure on emerging markets, already struggling with concerns over the commodity price collapse, a looming US interest rate rise and capital outflows.

Kazakhstan Tenge Slides 23% as Emerging-Market Rout  - (www.bloomberg.com) Kazakhstan relinquished control of its exchange rate in the latest sign emerging nations will stop defending their currencies after China roiled global markets by devaluing the yuan. The central Asian nation, which counts Russia and China as its top trading partners, said it was switching to a free float, triggering a 23 percent slide in the tenge to a record 257.21 per dollar. Since the shock yuan devaluation last week, a gauge of 20 developing-nation exchange rates capped its longest slump since 2000, Vietnam devalued the dong and currencies from Russia to Turkey and Malaysia slid at least 4.6 percent.

Oil Goes Down, Bankruptcies Go Up - These 5 Frackers Could Be Next To Fall – (www.forbes.com) So who will be next to fall? The list of troubled companies slumping toward Chapter 11 is growing. SandRidge Energy, Goodrich GR +% Petroleum, Swift Energy, Energy XXI, and Halcon Resources have all lost more than 90% of their market value since 2014, are larded up with too much debt, and would be lucky to survive the bust. Shalemageddon is coming, albeit delayed a bit, a-la bank extend-and-pretend, 2007-crash style. This part of the article is especially funny to us: Samson is the biggest bankruptcy of the oil bust so far, and a huge black eye to private equity giant KKR, which in 2011 led a $7.2 billion leveraged buyout of the company. The deal was a classic LBO: about $3 billion in equity backed by more than $4 billion in debt. It seemed like a good idea at the time... 


Currency turmoil in emerging markets escalates - (www.ft.com)
U.S. crude prices fall towards $40 on global glut
- (www.reuters.com)
Impact of Tianjin disaster reverberates across Chinese economy
- (www.bloomberg.com)
Asian Stocks Fall Fifth Day on Fed Minutes, China Slowdown Fears
- (www.nikkei.com)
Kazakhstan Scraps Currency Trading Band, Moves to Free Float
- (www.bloomberg.com)

Bulls Walk Away From U.S. Options Market as Put-Call Ratio Jumps
- (www.bloomberg.com)
Fed's Williams: Raising rates to pop housing bubbles 'very costly'
- (www.reuters.com)
July Was Earth’s Warmest Month in Records Going Back to 1880
- (www.bloomberg.com)
North, South Korea Trade Fire Along Border as Tensions Worsen
- (www.bloomberg.com

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