Daily Digest 6/26 – U.S. Shale An ‘Unmitigated Disaster,’ Putin’s Big Bet on Gold Is Paying Off


US shale an ‘unmitigated disaster’ with industry hundreds of billions in debt – shale pioneer (Saxplayer00o1)

One estimate from the Wall Street Journal found that over the past decade, the top 40 independent US shale companies burned through $200 billion more than they earned. A 2017 estimate from the WSJ found $280 billion in negative cash flow between 2010 and 2017. It’s incredible when you think about it – despite the record levels of oil and gas production, the industry is in the hole by roughly a quarter of a trillion dollars.

Company earnings look like they will keep sliding through the third quarter (Saxplayer00o1)

As profit reports just start to trickle in, the expectations are getting worse. Forecasters already were indicating negative earnings growth for the second quarter, but the outlook also has swung into red numbers for the third quarter, according to the latest FactSet calculations.

We’re already in recession, here’s what to do, says economist who called last bubble (Saxplayer00o1)

“I think we’re probably already in a recession, but I think [it will] probably be a run of the mill affair, which means real GDP would decline 1.5% to 2%, not to 3.5% to 4%, you had in the very serious [past] recessions,” said the president of money manager A. Gary Shilling & Co. He also lays claim to having forecast a global inventory glut that led to the 1973 to 1975 U.S. downturn.

Euro zone yields test lows as focus turns to under-fire Fed (Saxplayer00o1)

German 10-year yields were at -0.311%, a shade away from the record low of -0.329% hit last Tuesday. Dutch, Austrian and Finnish 10-year yields are also in negative territory. French 10-year yields were a shade above at 0.02% while Irish 10-year yields were at record lows.

UBS: World economy ‘one step away from global recession’ (Saxplayer00o1)

“U.S. tariff escalation is NOT our base case,” the bank said. “But if escalation is not averted in the next week or so … we anticipate making major changes to our forecasts.

It added: “We estimate global growth would be 75 [basis points] lower over the subsequent six quarters and that the contours would resemble a mild ‘global recession’” that would rival Europe’s debt crisis and the oil collapse of the mid-1980s, according to UBS analysts.

Putin’s Big Bet on Gold Is Paying Off (Saxplayer00o1)

The dollar, of course, remains the world’s biggest reserve currency, and gold and other currencies aren’t exactly displacing it worldwide. But then, the World Gold Council has noted an upward trend in net gold purchases by central banks that goes way beyond the Russian effort – even through Russia remains the biggest buyer. In the first quarter of 2019, central banks bought a record amount of gold, 715.7 metric tons.

A leveraged-lending bust could hit economy quicker than subprime blowup, says ex-FDIC boss Sheila Bair (Saxplayer00o1)

The amount of leveraged loans outstanding globally stood at $2.2 trillion as of 2018, according to a Bank of England report published in January. That was nearly double the size of the U.S. subprime mortgage market in 2006.

The Boomers Ruined Everything (Adam)

But it’s not just aging. In a variety of different areas, the Baby Boom generation created, advanced, or preserved policies that made American institutions less dynamic. In a recent report for the American Enterprise Institute, I looked at issues including housing, work rules, higher education, law enforcement, and public budgeting, and found a consistent pattern: The political ascendancy of the Boomers brought with it tightening control and stricter regulation, making it harder to succeed in America. This lack of dynamism largely hasn’t hurt Boomers, but the mistakes of the past are fast becoming a crisis for younger Americans.

Myanmar shuts down internet in conflict areas as UN expert warns of potential abuses during blackout (Sparky1)

The unrest caused by the anti-Rohingya crackdown and exodus has been exacerbated by conflict between the Tatmadaw and the Arakan Army, a Buddhist insurgent group, which has been fighting with the government since last year. More than 35,000 civilians have been displaced by the conflict, according to the United Nations, with violence spilling over into neighboring Chin state.

US releases review on removing vegetation to stop wildfires (Sparky1)

Giant rangeland wildfires in recent decades have destroyed vast areas of sagebrush steppe that support some 350 species of wildlife. Experts say the blazes have mainly been driven by cheatgrass, an invasive species that relies on fire to spread to new areas while killing native plants, including sagebrush.

Managing climate change will require increased energy usage (Sparky1)

The model produced a baseline simulation for comparison, in which population and income growth were the primary driver of energy demand. Compare the baseline, modest global warming increased energy demand between 11 and 27 percent. Vigorous warming increased energy demand between 25 and 58 percent. Simulations showed Europe, China and the United States experienced the greatest increase in energy demand.

Colorado’s snowpack is 40 times normal after rare summer solstice dump (thc0655)

At Arapahoe Basin, so much snow has fallen since the winter that it has stayed opened for skiing on weekends through the month. It declared Saturday a powder day after a fresh coating of two inches. The resort plans to open again next weekend and possibly over the July 4 weekend, its blog says.

The snow was triggered by an unusually cold pool of air at high altitudes over the western United States combined with a vigorous weather disturbance that ejected out of the Southwest.

Gold & Silver

Click to read the PM Daily Market Commentary: 6/25/19

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