Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: loans

Oil Industry Facing Massive Challenges

This article appeared online at TheNewAmerican.com on Monday, February 29, 2016:  

Sunoco

Energy producers are facing challenges that are threatening the existence of not only marginal, highly-leveraged producers, but large companies as well.

Canadian-based Suncor is just one example. Known for its Sunoco brand (now Petro-Canada), Canada’s largest crude-oil producer reported three weeks ago that it suffered a fourth-quarter loss of $1.45 billion and that it was slashing its capex (capital expenditures) for 2016 by 10 percent, forcing its expected 2016 production to fall by the same amount. It is also selling assets in order to keep paying its dividends to nervous investors. But Steve Williams, the company’s CEO, told equally nervous participants that “We will be one of the last guys standing.”

Lamar McKay, BP’s deputy chief executive, did the same: “Times are tough. You’d almost call them brutal right now. But we will adapt. We will make it.” This from the world’s sixth-largest oil and gas company which lost $6.5 billion in 2015 and was forced to lay off more than 3,000 employees.

John Hess, CEO of the Hess Corporation, also pumped his company’s resilience in the face of low crude prices. A much smaller company than BP, Hess Corporation suffered a loss of $3 billion last year, its first in more than a decade. Said Hess: “Our company has some of the best acreage [in North Dakota]. We can be more resilient as prices recover.”

Taken together, the oil industry worldwide has cut more than 300,000 jobs since the summer of 2014 (the peak of oil prices), while capex of nearly $1.5 trillion will be cancelled between 2015 and 2019, according to the conference sponsor. So far nearly 50 U.S. oil producers have filed for bankruptcy protection this year, with many more sure to follow this spring as banks readjust their reserve valuations used to back up their loans. This could imperil more than $17 billion in debt held by banks.

The most important revelation at the conference came from Saudi Arabia’s oil minister, Ali Al-Naimi, when he said that his country — despite rumors to the contrary that had driven crude oil prices temporarily higher — had absolutely no plans whatsoever to cut production in order to support higher prices. On that news alone, NYMEX crude oil fell $2 a barrel on Friday.

One of the problems facing these executives is the fact that frackers continue to produce in the face of falling rig counts and smaller workforces. Peak oil production touched 9.6 million barrels a day last year and remains at 9.1 million bpd. Daniel Yergin, the founder of Cambridge Energy Research Associates (CERA), now a subsidiary of IHS Inc., expects things to get worse — perhaps much worse — before they begin to get better:

This year is going to be very rough on the industry, very turbulent. We think that the decline in U.S. production is going to get more serious — another 600,000 to 800,000 barrels a day in this kind of price environment.

Globally the energy industry cut capex spending in 2015 by nearly 30 percent compared to 2014, while those in the United States have cut even further: an estimated 40 percent. For 2016, IHS CERA expects several large U.S. producers to cut spending by 50 percent compared to last year.

In the meantime, there’s another problem: where to store the surplus crude oil, estimated to be piling up at the rate of 1.5 to two million barrels every day. Empty tankers are being leased to store the surplus, called “floating storage,” waiting for demand to pick up (or supplies to dwindle). Now there is “rolling storage,” with 20,000 empty railroad tank cars sitting in sidings and storage yards across the country. Salt caverns and tankers are almost at capacity, and companies such as the Musket Corporation are taking advantage. Musket is a privately-held shipping company in Houston that built its business shipping crude oil by rail. But now it is in the storage business, finding and leasing empty tank cars to store the surplus until that “turnaround” day arrives, when demand exceeds production, and the surplus can be sopped up.

Since there is little evidence on the horizon to support higher crude oil prices, oil industry executives are running out of options and optimism. It will take more than a stiff upper lip to jawbone higher oil prices. In the meantime, for many it’s a matter of survival until that happy day arrives.

Pollyanna in Houston: False Optimism Pervades Oil Conference

This article was published by The McAlvany Intelligence Advisor on Monday, February 29, 2016:

Cover of "Pollyanna"

Cover of Pollyanna

Author Eleanor Porter would be proud. Not only did her 1913 children’s book Pollyanna establish the “Pollyanna Principle” (someone with an excessively optimistic outlook despite facing all manner of difficulties), it set in motion eleven sequels by Elizabeth Borton or Harriet Lammis Smith. There were movies starting Mary Pickford and Hayley Mills.

All three authors were present in Houston last week, at least in spirit. First,

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Straight-line Thinking in a Curvilinear World: Natural Gas and Aubrey McClendon

This article was published by The McAlvany Intelligence Advisor on Wednesday, February 10, 2016:  

Chesapeake Energy Capital Classic

It’s now apparent that Aubrey McClendon didn’t see the bumper sticker that appeared on cars following the last energy crash: “Please, God, give me one more boom and I promise not to screw it up.”

McClendon, along with a partner, $50,000, and 10 employees, started Chesapeake Energy in 1989. The company grew exponentially as the fracking revolution took off and up until recently the company employed 5,500 people and had annual revenues of $11 billion. Its stock (CHK) soared,

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Just how Disruptive are Uber and Lyft?

This article was published by The McAlvany Intelligence Advisor on Friday, October 2, 2015: 

According to three college professors, the answer is “very.” After interviewing 32 drivers and users of Uber, Lyft, and conventional cab services in London and San Francisco, the Uber and Lyft drivers and customers were the clear winners. The drivers had more freedom to select their working hours, many of them driving part-time to supplement their full-time work. The ride-sharing customers not only paid less than they would have for regular taxis, they felt safer, they knew more about the driver and his ratings from previous customers, and could track and follow the driver as he wended his way towards their location.

They also enjoyed getting to know their Uber or Lyft driver, discovering that they were just like them – ordinary people making a living and enjoying the process. Wrote the professors:

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Like a Zombie, the Export-Import Bank is Threatening to Come Back to Life

This article was published by The McAlvany Intelligence Advisor on Wednesday, September 9, 2015:  

The movie White Zombie, a horror film in 1932 starring Bela Lugosi, featured zombies as mindless, unthinking henchmen under the spell of an evil magician. The Export-Import Bank doesn’t quite fit the definition, but it’s close.

Crafted by socialists surrounding FDR in 1934 and given life by an executive order, Ex-Im was granted permanent status as an agency in 1945. It has been repeatedly, endlessly, mindlessly resurrected almost 20 times since then, until the end of June.

Since then pressure has been building among its crony beneficiaries

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Pressure Increasing to Reopen Export-Import Bank

This article appeared online at TheNewAmerican.com on Wednesday, July 15, 2015:

It’s been just two weeks since the Export-Import Bank’s charter lapsed — that “fund of corporate welfare” as criticized by presidential candidate Barack Obama in 2008 before reality set in — and two predictable things have occurred: The world continues to turn without it, and K-Street lobbyists are busy trying to resurrect it.

With massive radio advertising and extensive help from the media publishing op-eds in its favor, the chances are increasing that the zombie will come back to life.

The deceased bank, touted as offering loan guarantees to small businesses wanting to do business overseas but unable to obtain financing in the regular way, was turned into a slush fund of free money to the country’s largest corporations:

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Greece to the EU: NO!

This article was published online at TheNewAmerican.com on Monday, July 6, 2015:  

In an astonishing blow to the European Union’s credibility, Greek voters, fed up with five years of austerity, continuing recession, 25-percent unemployment, and severe cuts in pension payouts, strongly said “No!” at the ballot box Sunday. The 68-word ballot question, rejected by 61 percent of the voters, reads (translated into English):

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Will Sunday’s Greek vote Signal the end of Monnet’s Dream?

This article was published at The McAlvany Intelligence Advisor on Friday, July 3, 2015:  

Greece’s Prime Minister Alexis Tsipras said that Sunday’s vote is only about accepting or rejecting the troika’s terms to restart the flow of bailout funds that has been keeping the Greek economy from tanking. He said that a “no” vote “does not mean rupture with Europe but a return to Europe with values.”

Most assuredly Sunday’s vote is likely to, in hindsight, turn out to be much more than that. Historians might write that Sunday, July 5, 2015, ended Monnet’s dream.

Monnet was the architect, the primary driving force, behind the failing experiment in Europe called the European Union. He was head of the first genuine European executive body,

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Export-Import Bank’s Charter Expires, for the Moment

This article appeared online at TheNewAmerican.com on Wednesday, July 1, 2015: 

English: Export-Import Bank of the United Stat...

Visitors to the Export-Import Bank’s website on Wednesday would have found a terse notice that its charter had “lapsed” effective midnight, June 30, meaning that “the Bank and any of its delegated authority lenders cannot authorize any new transactions.” However, the bank is likely to have a very long life even after its death:

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Stock Market Wipes Out All Gains for the Year

This article first appeared online at TheNewAmerican.com on Tuesday, June 9, 2015:

On Monday, June 8, the Dow Jones Industrial Average (DJIA) declined by enough to wipe out all gains investors thought they had made in stocks since January 1. It was confirmed by action in the Dow Jones Transportation Index (DJTA), which is even older than the Dow and reflects the price performance of the stocks of 20 transportation companies such as Avis, Delta Airlines, and FedEx. On Monday that index fell by two percent, its worst day since January 6, bringing that index to a loss of nearly 11 percent from its high earlier in the year.

The decline in the Dow was further confirmed by

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Tuition-Free Community College? Yea or Nay?

This article was published by The McAlvany Intelligence Advisor on Monday, June 8, 2015: 

Students at a table in Muscatine Community Col...

Students at a table in Muscatine Community College courtyard

 

In 2008 the city council of Knoxville, Tennessee created “Knoxville Achieves”, a philanthropically-funded free tuition program for lower income families who couldn’t afford college. It blended private funds with requirements that students receiving “last dollar” benefits (tuition expenses remaining after grants, scholarships and personal resources were used up) would be guided by volunteer mentors through regular consultations and planning sessions. If the students didn’t meet certain minimum performance standards, the mentoring stopped and so did the money.

This was a local response to the pitiful results, in general, that community college students were obtaining. Barely 20 percent of them obtain their associate’s degree after three years. It’s supposed to take two.

The first year 496 students received tuition assistance, with good results appearing almost immediately. It wasn’t the money – it was the mentoring and the tracking, following, and monitoring that made the difference. Students were, some for the first time, being held personally accountable to a friendly volunteer, along with receiving a financial incentive.

It worked so well that

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Cachet Fades: Hybrid Owners Trading for SUVs

This article first appeared online at TheNewAmerican.com on Thursday, April 23, 2015: 

 

2004-2008 Toyota Prius photographed in Bethesd...

Toyota Prius

 

Tuesday’s announcement from Edmunds.com, the car-shopping website, that twice as many EV (electric and hybrid) owners are trading in their cars for gas-guzzling SUVs as they were just two years ago shouldn’t have caught anyone by surprise. The math never really made sense, and with gas prices half what they were two years ago, reality is neutering the “cachet” of owning an “environmentally friendly” automobile.

When gas was $4.67 a gallon in October 2012 it would take five years of gasoline savings to make up the difference between a Toyota Camry LE Hybrid ($28,230) and a Toyota Camry LE ($24,460). But with gas prices half that, it now takes more than 10 years to break even.

Not only is market reality disrupting and removing the “cachet,” it is also

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Is NewSat the next Solyndra?

This article first appeared at The McAlvany Intelligence Advisor on Friday, March 27, 2015:

English: Export-Import Bank of the United Stat...

In 2012 and 2013, the Export-Import Bank unanimously agreed to guarantee loans by Lockheed Martin to a small private Australian satellite company called NewSat, whose president was ecstatic at the news. NewSat’s CEO Adrian Ballintine celebrated:

It is fantastic to receive the support of the U.S. Ex-Im Bank. They are backing our … satellite with a direct loan, with a favorable low-fixed interest rate and long tenure.

 

The deal is an Australian first for Ex-Im Bank and a major milestone towards the launch of Australia’s first commercial satellite.

His was a company worth $50 million before Ex-Im guaranteed $304 million in loans by Lockheed Martin to provide it with a satellite designed to reach all across the South Pacific and rake in millions. Ex-Im was simply following its charter: make loans no one with any sense would consider making.

Of course, that isn’t exactly what the bank’s charter really says;

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Huge Ex-Im Bank Loan Defaults Imperiling Bank’s Reauthorization

This article first appeared online at TheNewAmerican.com on Thursday, March 26, 2015: 

Seal of the Export-Import Bank of the United S...

Seal of the Export-Import Bank of the United States

On January 21, NewSat, a private satellite communications company headquartered in Australia, defaulted on a $21 million payment to its primary satellite provider, Lockheed Martin. That default is triggering an avalanche of defaults that could sink not only NewSat but also very likely the bank that guaranteed the loans financing the deal, the Export-Import Bank, whose charter is up for renewal on June 30.

The Ex-Im Bank has touted its ability and willingness to provide financing for American companies seeking to do business abroad but which couldn’t arrange financing the regular way: through private banking channels. According to the bank’s charter,

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Impacts of Lower Crude Oil Prices Continue to Spread

This article first appeared online at TheNewAmerican.com on Tuesday, January 13, 2015:

 

After oil forecaster Jeremy Warner got lucky last year when he accurately called the top in oil prices, with a fall to at least $80 a barrel, he doubled down by predicting “that the oil price will remain low for a long time, sinking to perhaps as little as $20 a barrel over the coming year before recovering a little.”

Warner got lucky once again when Goldman Sachs confirmed his prognosis, setting off an eye-popping five percent decline in oil to $45 a barrel which continued into Tuesday. Tuesday’s low was $44.20. As Goldman Sachs noted,

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Auto Loan Bubble a Replay of Housing Mortgage Bubble?

This article first appeared online at TheNewAmerican.com on Monday, January 12, 2015:

When Patrina Thomas decided it was time to trade in her 2002 Jeep in the summer of 2013, she went back to her local friendly Chrysler dealer. They were only too happy to take her Jeep as a down payment on a used 2008 Chrysler Sebring with the balance, an estimated $10,000, financed at 20.4 percent interest. Because her credit score was below 620, she qualified for “special” financing provided by Santander Consumer USA Holdings, a lender working closely with Chrysler Capital in such cases.

Her payment was so high — $385 a month — that she struggled to make it from the very first month. It finally got beyond her ability to pay, and the car was repossessed a year later. With a market value today of just $4,600 and her remaining loan balance of $7,600, she is upside down by $3,000.

Thomas has lots of company. According to the Wall Street Journal

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Yes, Karen, There’s an Auto Loan Bubble After All

This article first appeared at The McAlvany Intelligence Advisor on Monday, January 12, 2015:

2007 Chrysler Sebring photographed in USA.

Chrysler Sebring

There’s little doubt that Karen Weise enjoyed her weekend. Back in August she tried to raise concerns about the bubble in auto financing, but couldn’t pin them down. A reporter for Bloomberg Businessweek in Seattle, all she could find back then were Fed spokesmen pooh-poohing concerns that too many broke people were getting car loans, that such fears were “misplaced,” that “it’s unlikely the composition of auto loan originations in our data will radically change since last year,” as New York Fed spokesman Matthew Ward put it.

She quoted four economists from the New York Fed who were unanimous:

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Crude Oil Prices: The Politics, Implications, and Backlash

This article first appeared online at TheNewAmerican.com on Tuesday, January 6, 2015:

With the price of crude dropping significantly below $50 a barrel, prognosticators have come out of the woodwork predicting drops to $40, $30, $20 a barrel, and even lower before it rebounds.

Jon Ogg, writing at 247Wall St.com, noted that the precipitous drop in crude oil prices “has serious implications for consumers and companies alike,” and not all of them are unblemished blessings. On the surface the winners are

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Whistleblowers Get Paid, Countrywide Chairman Gets Off

This article first appeared at The McAlvany Intelligence Advisor on Monday, December 22, 2014: 

Last August, Bank of America agreed to pay out nearly $17 billion to settle sixteen lawsuits over making and marketing fraudulent mortgages leading up to the start of the Great Recession, setting a record in the process. But the details, under the False Claims Act, remained sealed until last week. The big news, according to the Wall Street Journal, was just how much four whistleblowers were getting: $170 million plus.

Even after the IRS and lawyers get their share, those four will enjoy a more comfortable lifestyle for a long time. Three individuals and a small New Jersey mortgage company, Mortgage Now, will share the spoils. Mortgage Now will receive

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Former Virginia Governor and Wife Guilty of Fraud, Conspiracy

This article was first published at TheNewAmerican.com on Friday, September 5, 2014:

English: Governor of Virginia at CPAC in .

Former Virginia Governor Bob McDonnell

Claiming through their attorneys that their marriage was so dysfunctional that any conspiracy charges simply wouldn’t hold water, former Virginia Governor Bob McDonnell and his wife were nevertheless convicted of 11 out of 14 charges of fraud and conspiracy in federal court on Thursday. Sentencing is scheduled for early January 2015, and will likely result in years if not decades behind bars for the couple.

Former Virginia Commonwealth University professor Bob Holsworth, who followed the case from its inception, expressed surprise at the defense attorneys’ odd strategy: 

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.