We’ve written quite a bit about US O&G producers’ dependence on capital markets to plug funding gaps.
In short, the entire space is free cash flow negative, which means without access to liquidity, the whole thing falls apart. That, Citi wrote last September, is shale oil’s “dirty little secret.”
As noted earlier today, BofA's chief credit strategist Michael Hartnett is anything but bullish: in his own words, he remains a seller "into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations and credit conditions."
Submitted by Eric Bush via Gavekal Capital blog,
The S&P 500 is currently down a little over 7% YTD and 11% of the May 2015 high. Unfortunately, all signs coming out of the bond market are signalling a further fall in equity prices.
The spread between AAA rated corporate bonds and the 10-year treasury bond has blown out to 213 basis points over the past couple weeks. This is the widest spread since September 2011, during another period of market turmoil.
You know the world is turning to shit when a retired baseball star can (relatively eloquently) explain the sheer folly of negative interest rates.
In a torrent of tweets, the Cuban-American "Bash Brother" started to rage after BoJ's NIRP decision...
Negative interest rates in Japan is blowing my mind
— Jose Canseco (@JoseCanseco) February 4, 2016
Then questioned their sanity...
It would be a lot easier to be bullish today if the entire financial system wasn’t based on fraud and BS.
Every explanation we see regarding the bull market in stocks is really just a cover for the fact that Central Banks spent $14 trillion propping up the bond bubble.
All claims that stocks went up because of the “recovery” or because of “expansion” or whatever really translate to “stocks went up because TRILLIONS in liquidity went into the system and a lot of it ended up in stocks.”
Here’s the reality of things.