[Home] [Headlines] [Latest Articles] [Latest Comments] [Post] [Sign-in] [Mail] [Setup] [Help]
Status: Not Logged In; Sign In
|
Business/Finance See other Business/Finance Articles Title: A personal email with a dire warning from Jim Rickards… Baltimore, Maryland December 9, 2014 Peter Coyne Dear Reader, You’d think you couldn’t get more ominous than an article titled “Plummeting Oil Prices Could Destroy the Banks That Are Holding Trillions in Commodity Derivatives.” Yet there was the personal email from our own Jim Rickards sitting in my inbox: “Peter, “The analysis in this article is excellent; I agree with it. “But it does not go far enough… “The full risk may be in portfolios all over the place, held by investors who don't even know they have it. This could be a fiasco, bigger than the mortgage meltdown in 2007. It will take a year to play out. It won't happen all at once. A lot depends on whether prices stay at $60 or bounce back. But a huge meltdown has begun. “Jim.” The price of crude oil has dropped 40% since June. Perhaps you’ve noticed. At writing, Brent crude, the international benchmark, fetches $66 per barrel. The domestic benchmark, West Texas Intermediate, goes for $63. Thus, producers -- U.S. and foreign, alike -- are hurting. Some more than others. Many investors, maybe even you, are worried about the health of frackers bought into when the industry was flying high. A valid concern… one Byron King and Matt Insley from our resource team are actively tracking for you. Upon seeing a Bloomberg article last Tuesday, Dec. 2, titled “Junk Bonds Backing Shale Boom Facing $11.6 Billion Loss,” however, our gaze was diverted. Our metier, after all, is spotting bubbles and busts ahead of time. This had all of the trappings of a threat more devastating than a single stock going up or down in price. “The oil sell-off,” Bloomberg reported, “is deepening concern among bond investors that the least-creditworthy oil explorers will struggle to pay their obligations and prompt bankers to rein in credit lines as revenue slumps.” Live intelligence briefings -- webinars we hold every month with Jim -- are one of the many benefits of subscribing to his newsletter, Strategic Intelligence. But in times when we need to give expert advice and actionable steps for readers to protect their portfolios -- like right now -- they come in extra handy. We called this morning’s event Jim’s Urgent Oil Threat Intelligence Briefing. It was for subscribers who had signed up for Jim’s letter for life. A special perk. It was the second briefing we held this week (both are recorded for you to listen to when you join Jim’s service). Altogether, readers were given more than two hours of Rickards unplugged. Yesterday’s focus: The state of the global currency wars -- and the role crude oil prices play in them. Today’s theme: The threat of energy sector junk bonds and derivatives triggering Jim’s collapse forecast. “The threat you’re hearing about today is like if we held a call in 2006 about the coming mortgage crisis,” proclaimed Jim to attendees this morning eager to learn how to sidestep a potential collapse in this market. “There’s still a little time for you to get out of the way of this coming train wreck.” The other benefit of Jim’s briefings -- and what separates his newsletter from countless others in our crowded industry -- is his use of “complexity” or “avalanche” theory (click the link and scroll down for an explanation) to analyze financial markets. He’s probably the most qualified man in the world to apply the framework to capital markets. “Here in energy sector junk bonds, you have a $5 trillion market with $1 trillion in losses.” In terms of Jim’s oft-cited snowflake and avalanche analogy, this threat hidden within the energy sector makes the unstable snowpack even bigger and more unstable. Remember Jim’s basic warning -- it’s as if the world looked at the aftermath of 2008 and decided to double down. Today, the too-big-to-fail banks are bigger… the risky derivatives bets that tanked the market are larger… and the Fed’s money printing is running even further amok. Now pile on this new market hazard. “Go back to 2007,” says Jim. “What was the total amount of subprime and Alt-A loans? That number was about a trillion, and the losses in that sector ticked above 20%. There you had a $1 trillion market with $200 billion losses. Here in energy sector junk bonds, you have a $5 trillion market with $1 trillion in losses. This is bigger than the subprime crisis that took down the economy in 2007. We are looking at a disaster.” Based on industry sources, Jim believes that oil faces a $60 floor. At that point, many U.S. shale producers are in real trouble. As it is, “there’s $2 trillion of corporate debt write-offs with $69 oil,” according to him. Any lower and “the Fed will have to reflate or let markets burn.” As for the rosy “oil’s drop means consumers will have more to spend” narrative, Jim says, “I like $1.99 gas too,” but tweets this counterpoint: Rickards Tweet “Today’s briefing,” explained Jim “gives you a big advantage. Imagine having the information in 2006 to call up your broker and say, ‘Let me make sure I have none of this subprime stuff in my portfolio.’” Subscribers to Jim’s letter who are lifetime members received no fewer than five specific ways to prepare and profit starting today. You can access the recordings when you become a member. To do so, click here and be sure to become a lifetime member. That will give you access to today’s urgent oil threat briefing, along with three specific stock recommendations to double your money or more on the trend. Below, Wolf Richter -- founder of the financial blog Wolf Street -- surveys the oil and gas junk bond and leveraged loan markets. You’ll see the extent of the bloodshed thus far and that yet to come. We were introduced to his writing through our friend David Stockman’s Contra Corner website. Sound investing, Pete for The Daily Reckoning Post Comment Private Reply Ignore Thread
|
||
|
[Home]
[Headlines]
[Latest Articles]
[Latest Comments]
[Post]
[Sign-in]
[Mail]
[Setup]
[Help]
|
||