Monday, July 25, 2016

High Plateau Drifter On "Clinton Cash"

High Plateau Drifter writes,

Clinton Cash, the movie, is a remarkable documentary of abrupt Clinton policy reversals in individual cases granting approvals worth billions to be followed within a few days by lucrative speech opportunity for Bill Clinton or a big donation to the Clinton foundation from the recipient of the approval. Remarkably, her approval of projects in several African countries harmed the impoverished Black populations while corrupt elite dictators sold their countries natural resources to Hillary's friends on the cheap rather than develop them in open market bidding and under deal structures that would most benefit the native population. Same story in Haiti.

The movie has gone viral on Facebook, being the number one trending topic on their news feed, and with Sanders fan pages directing hundreds of thousands of viewers to the Utube video on its first day out.

Suddenly the private email server makes sense. These corrupt deals could only be arranged though extensive communication among a number of parties, and other participants would have to be involved to allow Hill and Bill plausible deniability. Also it amazes me that they sold out so cheaply, giving away approvals worth billions for a mere $500,000 or so each.

If this movie is widely viewed, Hillary is going to have a very hard time winning the election. And if Guccifer2 or someone else has and distributes the 30,000 emails she deleted it is curtains for Hillary. My sense is that most of the Beltway including Republican congressmen were aware of this activity and did nothing. The video will severly damage the credibility of our government including establishment Republicans who did nothing to stop it.

Thus I am watching to see how the bond reacts.
Watch it below,

Sunday, July 17, 2016

How to Tell the Top in Bonds Is Getting Close!

When you see articles like this: "The Looming Shortage in Government Bonds".

That is toppy thinking. In fact, anytime you hear "shortage" you should beware of a price reversal coming. Shortage of natural gas, shortage of oil.

In the U.S. we have an debtor that has borrowed close to 100% of GDP already and planning to borrow a lot more to cover ponzi retirement and healthcare promises. The federal government is like an insolvent insurance company and if it didn't have nuclear weapons it would be in receivership alreadu.

Believe me, there isn't going to be a "shortage" of government empty promises.

Saturday, July 16, 2016

The Fake Coup

A correspondent writes,

The coup in Turkey was a fake meant to facilitate the arrest, removal, and replacement of its western-oriented legal system by a fundamentalist Muslim shariah law system.

The coup ended too quickly, with little real combat. It did not unfold like a normal coup, but like a staged drama. For example the regime was ready much too soon with arrests of a long list of judges and prosecutors who could not have had anything to do with military activity, but who were a barrier to imposition of shariah law.

The logic of coups has been worked out. There is an extensive literature and most any coup plotter would have read some of it.

He surely would have read Edward Luttwak's 1979 book, Coup d'Etat: A Practical Handbook. He would have known to arrest or kill the present head of state and, nowadays, to shut down the internet.

Wednesday, July 13, 2016

Bonanza Creek Energy, Inc. Hires Restructuring Advisor $BCEI

From 8-K filing:

Bonanza Creek Energy, Inc. (the “Company”) has retained Perella Weinberg Partners to advise the Company and assist in analyzing and evaluating financial and transactional alternatives, including restructuring options. Davis Polk & Wardwell LLP will continue to provide ongoing corporate and finance representation, including in connection with the above activities.
The BCEI notes last traded at a YTM of 29%.

Thursday, July 7, 2016

Which Option Sounds Better?

  • Silver puts. Marginal cost and all-in cost are around $10 plus or minus a couple bucks, and the spot price is back to almost $20 with speculators record long futures and commercials very short. A 2018 $13 put can be had for under 50 cents, make 5x if the price goes back to $10.
  • 30-year treasury puts. Fiat debt from banana republics is garbage, not a "magic sword of necessity" - the yield was twice as high as recently as the end of 2014. That would be $95 on TLT, a decline in value of about a third. The Jan 2018 $100 put for TLT is about 80 cents.

Friday, July 1, 2016

High Plateau Drifter on the Government Bond Bubble

CP and I often discuss the problem of timing the top in the bond market. The bond market is the big kahuna. It is the one market that is so huge that governments will not be able to control it once it starts heading south. At the moment, and as long as the government can issue bonds and have the Fed purchase them, it will have ample funds to keep the S&P 500 elevated and counteract the steady selling by individual investors:

"According to Lipper data, U.S.-based stock mutual funds, which are held by retail mom-and-pop investors, posted cash withdrawals of $2.8 billion over the weekly period ended Wednesday; this was the 16th consecutive week of outflows.

All stock funds, including ETFs, posted an even wider $6.8 billion outflow last week to mark their biggest withdrawals since early May, while taxable bond funds posted $2.6 billion in outflows after raking in $2.5 billion the prior week. The perpetual question of who is buying remains especially after BofA reported earlier this week that its "smart money" clients sold US stocks for the third consecutive week and in 21 of the past 22 weeks, led by institutional clients' sales."
Baby boomers, who own directly and indirectly about 75-80% of the U.S. stock market have begun selling and will continue to sell to maintain their life styles. Fed governors and employees are academics. They are not multi millionaires. They and everyone they know in their social circles have university sponsored TIAA and CREF accounts and pensions funded by future stock market gains. So naturally, the primary real policy of the Fed is to keep the stock market elevated. Their worst nightmare is a clear inevitability - that at some point the boomers are going to panic and sell everything attempting to get out before the rush.

The big question then is what happens to bonds?

Right now the Fed is creating new money to buy treasury debt which finances the ongoing fiscal deficit. At the same time, corporations are issuing record amounts of new debt to finance share buy backs. In the Euro zone Draghi is buying corporate debt as well as European sovereign debt, most of which has no coupon and much that is in NIRP. Of course to the extent that the Fed purchases government debt with a positive coupon, the remittance of the coupon amounts back to treasury eliminates the interest cost on Treasury debt parked at the Fed. The positive coupon is the cheese that lures pension funds and insurers to take down slices of this thus far appreciating debt.

The reason I write this now is that the gold and silver markets are screaming that the end is near for bonds. The question is, how near?

I think everyone in the markets understands that the debt "purchased" with newly created money and held by central banks will never be sold into public markets and purchased by private investors. It is a translucent fig leaf to cover naked money printing. Printing that must continue for as long as governments continue deficit spending. After all, halting central bank purchases and offering all this sovereign debt to private purchasers would produce a dramatic hike in interest rates.

We can see that gold and silver now "get it." How long before pension funds, insurers and other balanced portfolios begin to listen to the gold and silver markets and begin to demand higher yields to compensate for the risks of higher inflation.

I don't have the answer, but I am watching for clues. I would be interested to know what you readers think.

Thursday, June 30, 2016

What's the Story With Helium One?

At CBS, we've been paying some attention to a potential, impending helium shortage.

We saw some odd news (and a ton of publicity) this week about a startup, Helium One, that claims to have discovered a "huge helium gas field" in Tanzania - 54 billion cubic feet!

But there are some hilarious pictures of the apparent discovery process - a guy looking at a puddle, and a plastic tube propped up on a stick.

Are they really trying to raise $40 million on the basis of that alone? I wonder whether they've read The Big Score??

P.S. I love Glenn Chan on resource investing. He has a lot of must-reads including Mine economics explained, Figuring out the skill of mining CEOs, and Smart fraud.