Category Archives: Investment outlook

How Shale Is Becoming The Dot-Com Bubble Of The 21st Century

The parallels of the dot com era with the shale boom are simply stunning as most E&P companies need to spend well over their operational cash flow.

Witnessing A Fundamental Change In The Oil Sector

The U.S. oil production decline has begun.

Pettifor Warns of GFC 2.0 Approach

Yves here. This is a short but important debate over how much to worry about the upcoming train wreck in emerging markets when the Fed finally gets around to tightening. Pettifor sees it as a potential global crisis event; Macrobusiness sees it as a typical emerging markets bust. The Pettifor viewpoint seems more on target. First, […]

Explaining the Dearth of Private Investment

Business investment in advanced economies contracted sharply during the global crisis and has recovered little since. This column argues that the main factor holding back investment is overall economomic weakness. In some countries other contributing factors include financial constraints and policy uncertainty. Fixing the investment dearth will require fixing the general weakness in economic activity.

Rob Parenteau: Draghi’s Doom Loop(s) – More Than Just the Euthanasia of the Rentiers

Draghi’s Doom Loop(s): why the ECB’s QE, combined with negative deposit rates, could set a 1987 style crash for bonds in motion.

Central Banks Warn: Investors May Get Crushed When They All Run for the Exits

This post illustrates how remarkably short investors’ memories are. Or they may be betting that if they have a big enough hissy fit when monetary authorities raise rates, as they did during the taper tantrum of 2013, that central banks will lose their nerve.

Wolf Richter: Investors Crushed as US Natural Gas Drillers Blow Up

The carnage in natural gas drillers that Wolf called early has arrived.

Tech’s Four Horsemen of the Apocalypse: Amazon, Facebook, Google, Apple

This is a great talk on the outlook for the four dominant tech companies by Scott Galloway of L2. Trust me. Just watch it.

Nomi Prins: The Volatility/Quantitative Easing Dance of Doom

The battle between the ‘haves’ and ‘have-nots’ of global financial policy is escalating to the point where the ‘haves’ might start to sweat – a tiny little. This phase of heightened volatility in the markets is a harbinger of the inevitable meltdown that will follow the grand plastering-over of a systemically fraudulent global financial system.

Wolf Richter: The US Oil Bust Just Got Worse

Wolf was early to point out the disconnect between declining rig counts, which the mainstream media has touted as proof that the oil bust was about to end, and rising production. That pattern has not abated.

Dear Federal Reserve: Now is the Time to Raise Interest Rates? Really? Seriously?!?

I am at a complete loss as to why the Federal Reserve might think that now is the moment to begin raising interest rates. I cannot see a scintilla of hard evidence in support, and potent evidence against.

Could Oil Prices Plummet A Second Time?

Are oil prices heading for a double dip?

Wolf Richter: The Chilling Thing Devon Energy Just Said About the US Oil Glut

Devon Energy shows how companies are pumping even more oil with fewer rigs and lower investment, perpetuating the oil oversupply.

Wolf Richter: Junk-Bond Bubble Implodes Beyond Energy, Deals Scuttled, Yields Soar, Suddenly “Insufficient Demand”

The year 2015 has just started, and already there have been two junk-bond casualties: the first on Thursday, and the second one yesterday. They weren’t energy companies. Energy companies don’t even try anymore.

Benchmarking the ECB’s QE Program

The ECB is set to announce the details of its QE program tomorrow. Many analysts and investors have been trying to puzzle out how its operations might work, since those details will make a difference in what impact if any it has.

Frankly, we are hugely skeptical of this initiative. The US version, which is bizarrely touted as a success, further zombified the economy. It goosed asset prices, which widened wealth and income inequality. Now respectable economists are decrying the widening gap between rich and poor and the lack of class mobility as a brake on growth, yet they also refused to endorse debt restructuring and much more aggressive fiscal spending. And some experts contend that the reason the Fed decided to end QE last summer was that it came to recognize the costs outweighed what if anything it produced in the way of benefits. Of course, they can never admit that publicly or even privately if true.

In Europe, there is even more reason to be expect QE to be at best ineffective. Unlike the US, where as a matter of policy, a lot of financing takes place through the capital markets (for instance, credit card debt, subprime auto loans, home loans are all securitized to a large degree), in Europe, far more credit is on bank balance sheets, and small to medium sized corporate lending is far more important than in the US. Thus, while as we have repeatedly explained, putting money on sale is unlikely to result in more borrowing unless the cost of money is the biggest cost of running your business (ie, you are a bank or a speculator), in Europe you have the added layer that reducing investment yields is unlikely to change how credit officers view lending to small/medium sized enterprises (assuming they even want to borrow) in a weak, deflationary economy.

This Bruegel post describes the major options that the ECB has in designing its QE program, which will help readers benchmark tomorrow’s announcement. One might politely describe the choices as bad and less bad.