Look Who’s Not Buying The Dips: Oil-Rich Nations Dumping Petrodollar Assets At Record $200 Billion Pace - By Javier Blas (15/4/15) PDF Print E-mail
Javier Blas   
Wednesday, 15 April 2015 07:24

Bloomberg

Now that oil prices have dropped by half to $50 a barrel, Saudi Arabia and other commodity-rich nations are fast drawing down those “petrodollar” reserves. Some nations, such as Angola, are burning through their savings at a record pace, removing a source of liquidity from global markets.

If oil and other commodity prices remain depressed, the trend will cut demand for everything from European government debt to U.S. real estate as producing nations seek to fill holes in their domestic budgets.

“This is the first time in 20 years that OPEC nations will be sucking liquidity out of the market rather than adding to it through investments,” said David Spegel, head of emerging markets sovereign credit research at BNP Paribas SA in London.

Saudi Arabia, the world’s largest oil producer, is the prime example of the swiftness and magnitude of the selloff: its foreign exchange reserves fell by $20.2 billion in February, the biggest monthly drop in at least 15 years, according to data from the Saudi Arabian Monetary Agency. That’s almost double the drop after the financial crisis in early 2009, when oil prices plunged and Riyadh consumed $11.6 billion of its reserves in a single month.

The International Monetary Fund commodity index, a broad basket of natural resources from iron ore and oil to bananas and copper, fell in January to its lowest since mid-2009. Although the index has recovered a little since then, it still is down more than 40 percent from a record high set in early 2011.



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Jeff Immelt’s Desperate LBO Of GE - Ringing The Bell At The Top - By Robert Gore (15/4/15) PDF Print E-mail
Robert Gore   
Wednesday, 15 April 2015 07:22

Straight Line Logic

The day before Jeffrey Immelt became CEO of General Electric, September 6, 2001, its stock closed at $40.50. Friday its stock closed at $28.51, and that was after an almost 11 percent jump as the market reacted to GE’s announcement that it would shed most of General Electric Capital Corporation (GECC), buy back $35 billion more of GE stock than is currently authorized, and pay out $35 billion in dividends by 1918. Analysts and investors had long pressured GE to dump GECC, and “returning money to shareholders” is all the rage on Wall Street. The market’s immediate conclusion was that Immelt had finally done something right.

GECC borrows short-term to fund long-term leases and loans. It is a business model made for modern monetary policy, which suppresses short-term interest rates and elevates asset prices, and through the years GECC, the seventh largest US financial institution, has contributed a good chunk of GE’s revenues and profits. Only the occasional financial crisis, when short-term funding dries up and asset prices decline, throws a spanner in the works. Popular lore has it that GECC and GE almost went down the tubes in the last one, necessitating a rescue from Washington. However, David Stockman argues persuasively in The Great Deformation that then AAA-rated GE, market value $600 billion, could have easily covered the $25 billion funding shortfall by selling assets or issuing equity or debt.

Immelt is the crony capitalist’s crony capitalist, a former director of the New York Federal Reserve bank and a former head of President Obama’s Council on Jobs and Competitiveness. There has been a price, however, for what GE received from the government during the financial crisis; it has classified GECC as a Systematically Important Financial Institution (SIFI). This subjects it to onerous regulatory and capital requirements. One of the rationales for GE’s move is to make SIFI go away, giving GE more flexibility with its capital.



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"We're Living In A Gambling Society" - BlackRock's Larry Fink Urges CEOs To Stop "Short-Termist" Thinking - By Tyler Durden (15/4/15) PDF Print E-mail
Tyler Durden   
Wednesday, 15 April 2015 07:21

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Meet The Secretive Group That Runs The World - By Tyler Durden (14/4/15) PDF Print E-mail
Tyler Durden   
Tuesday, 14 April 2015 08:38

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How The GOP Became The Israel Party - Bill Kristol And John McCain Have Replaced Robert Novak And Pat Buchanan In Republican Foreign Policy Influence - By Scott McConnell (14/4/15) PDF Print E-mail
Scott McConnell   
Tuesday, 14 April 2015 07:21

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