Interest rate cut sparks warnings on Denmark ditching euro peg

Denmark dampened a rally in European financial markets on Monday after a cut in interest rates sparked warnings that it could follow Switzerland’s lead and end the krone’s peg to the euro.

The Danish central bank shaved 0.15 percentage points off its base rate to discourage investors from switching their funds out of eurozone banks ahead of the European Central Bank’s expected launch of quantitative easing this week.

The warning of a swift climbdown by Copenhagen undermined a strong surge in European shares which hit a seven-year high earlier in the day. The FTSE 100, which had climbed 78 points in mid-afternoon, finished the day up on 35 points at 6585. The Paris-based Cac following a similar path, finishing up 50 points before falling back to close only 30 points ahead.

The French prime minister François Hollande, anxious for the ECB to begin flooding the eurozone economy with extra funds, was forced to backtrack after appearing to announce that the central bank was ready to start buying eurozone sovereign debt.

“On Thursday, the ECB will take the decision to buy sovereign debt, which will provide significant liquidity to the European economy and create a movement that is favourable to growth,” he said in a speech to business leaders at the Élysée Palace.

Later, a spokesman said he was only talking theoretically and referring to QE as a “hypothesis”.

Speculation that the ECB will kick off a major spending spree has sparked increasing volatility in financial markets, especially since a European court of justice ruled that it was legal under EU law.

Last week, and only two days after the court ruling, Switzerland’s central bank chief blamed an imminent QE bonanza for his decision to cut rates to -0.75% andend a longstanding policy of tracking the euro. In a frenzy of trading on international currency markets, the Swiss franc jumped 30%.

Investors have sold the euro heavily in advance of QE, switching their allegiance to the fast-growing US economy and the dollar. In the last seven months the euro has lost 20% of its value against the dollar and could lose another 10% or 20% once QE takes effect.

Under QE, the ECB is believed to be ready to supplement its existing purchase of corporate bonds with tranches of government debt following a meeting of its governing council on Thursday. Some analysts believe only a programme worth €1tn (£767bn)will convince markets that the ECB is serious about tackling low inflation, while others say €750bn would be enough.

Foreign exchange dealer Clear Currency said: “Markets are expecting [the ECB] to announce a QE programme, €500bn would be at the low end of expectations with a programme of €750bn probably enough to appease markets.”

One plan believed to be under consideration would restrict the Frankfurt-based central bank to buying the debt of countries such as Germany and Finland, which are considered a safe bet. However, Mario Draghi, president of the ECB, has come under intense pressure from the leaders of southern European states to spread his net wider and buy government bonds from all 19 member treasuries. They are keen for cheaper funds to spur business lending and growth.

A steep fall in inflation in recent months has also raised the spectre of declining prices, which the ECB must avoid or risk deflation and a fall back into recession. European politicians from Paris to Vienna were shocked this month when figures showed with prices in December falling 0.2% prices falling 0.2% in December.

But the German chancellor Angela Merkel remains opposed to QE and has lobbied against Thursday’s announcement. Berlin has argued that the fall in inflation follows steep falls in oil prices, which may prove temporary. It has also stressed that the risks of sovereign bond purchases from the treasuries of weaker countries should be underwritten by the national central banks of those states.

Analysts at Morgan Stanley said a compromise is the likely outcome, limiting the impact. “A workable compromise for the ECB would be a hybrid programme with a core component in which financial risk is shared across the eurosystem, and an optional component relating to national central bank risk,” said the investment bank’s European economist, Elga Bartsch.

“We remain sceptical on the impact of sovereign QE because of the dissent inside the ECB, the potential political backlash, the legal uncertainties on government bond buying, and the Greek situation and its complex execution.”

To emphasise the extent of dissent inside the eurozone, the Irish finance minister Michael Noonan said buying Irish bonds and making the Irish central bank take the risk for their failure was self-defeating.

“If [QE] is going to be renationalised and if monetary policy becomes a function of national central banks acting as agents of Frankfurt I think it will be ineffective,” he said.

http://www.theguardian.com/world/2015/jan/19/denmark-euro-interest-rate-cut-warning

Russian Central Bank Bans Western Ratings Agencies

On the heels of last week's downgrades by Fitch and Moody's to just above junk status, The Central Bank of Russia (CBR) has issued a statement that it will no longer use credit ratings from Standard & Poor’s, Fitch, or Moody’s that were assigned after March 1, 2014. All credit ratings will now be at the discretion of the Board of Directors of the Bank as regulators assess whether or not the ratings made after March are accurate. Sounds like Spain, Greece, and USA's previous derision over ratings agencies proclamations is heading east.

As RT reports,

The Central Bank of Russia will no longer use credit ratings from Standard & Poor’s, Fitch, or Moody’s that were assigned after March 1, 2014.

All credit ratings given to Russian companies and banks will now be at the discretion of the Board of Directors of the Bank,according to a press statement Monday. The regulator will assess whether or not the ratings made after March are accurate.

The decision comes after Fitch and Moody’s downgraded Russian sovereign debt to just above junk status. Standard & Poor’s will decide whether it cuts Russian debt to junk level by the end of January after cutting it last April, after Crimea rejoined Russia and the West began to levy sanctions against Moscow.

*  *  *

Full CBR Statement:

On dates of credit ratings’ use for the purpose of Bank of Russia regulations

In line with scope of authority established by Bank of Russia Ordinance No. 3453-U, dated 25 November 2014, ‘On the Specifics of Credit Ratings’ Use -to Implement Bank of Russia Regulations’, the Bank of Russia Board of Directors determined the dates when credit ratings shall be assigned to implement Bank of Russia regulations.

Under this Ordinance, should any Bank of Russia regulation contain information on credit rating assigned by Standard&Poor’s or Fitch Ratings or Moody’s Investors Service to credit institutions or other Russian legal entities, constituent territories, municipal entities, their issued securities or other financial instruments, the date when the mentioned rating is assigned (hereinafter, the rating date) may bedetermined by the decision of the Bank of Russia Board of Directors in the corresponding regulation.

According to Bank of Russia Board of Directors’ decision, the rating date for credit institutions and their issued financial instruments, including securities, to implement Bank of Russia regulations, shall be 1 March 2014; as for other entities, listed in the Ordinance, and their issued securities, this rating date shall be 1 December 2014.

*  *  *

Ben Aris recently noted:

“They’re private companies, so we assume that they’re completely independent and not subject to political pressure.

However, they do exist in an American context and are subject there to the international media’s reporting which tends to give a single narrative – a very negative narrative when it comes to reporting – particularly the Russia story,”

All sounds very similar to the responses that troubled and over-indebted western nations had when the ratings agencies dared to downgrade them.

http://www.zerohedge.com/news/2015-01-19/russian-central-bank-bans-western-ratings-agencies 

SNB - Post-Mortem

The Swiss National Bank move to eliminate the 1.2 EURCHF Peg has proven to be a big market/media event. Follows a few random thoughts on how this story played out. Caveat - Some of this is wonkish, some guesses on my part.

The Weekly FX Flows

The FX market has two different types of risk profiles depending on what day it is. The two risk periods are:

Monday through Friday

Friday night through Sunday night

There are risks that the FX market participants face every second of the week. But the risks of the weekend roll are much higher than the Monday through Friday trading period

The developments during any given week may cause wild gyrations in FX pricing, but there is also a very active FX market to lay off, or take on risk. The FX market runs 24/7 from Monday morning in Asia until the close in NY on Friday. From Friday night to the next opening in Asia there is no market to lay off risk.

The fact that there are two different risk periods creates two classes of participants in the FX market. Short-term players who are trying to make a buck, but have no interest in taking positions over the weekend. And those who are taking a long-term view of the world, and are happy to take the risks associated with liquidity over the weekend. For every player who takes a long view there are 20 who only dance from Monday through Friday. The bulk of the actors are squared up for the weekend.

There is a very logical reason for this. Over the past twenty years the vast majority of "surprise" critical steps taken by government authorities have been taken on Sunday evenings. (Devaluations/revaluations, Fannie and Freddie going bust, TARP etc., Plaza Accord, Louver Accord) If you're in the FX Biz you pay very close attention to what surprises may have been released when the markets have gone dark. And depending on your risk profile you want to be square for the weekend.

The SNB broke the "rules". It dropped its bomb on a Thursday. It did it at a time that insured that the NY market was still asleep.

The SNB could have held off for a few days and made their big announcement on Sunday. The amount of gross positions outstanding on Sunday would have been a fraction of the positions that were outstanding on Thursday morning. Obviously, the timing by SNB was very deliberate. They acted in what I consider to be a hostile manner - the SNB was a predator to the market participants. Not very sporting at all.

If the SNB had acted in a manner consistent with how Central Banks/Government make announcements of key changes to policy, the losses incurred by the market would have been far less than what they were. The retail accounts that have been blown away this week would not have suffered anywhere near the losses they did. I would add to this that if the announcement had come over the weekend there would not have been a 20% move in the CHF. The adjustment would have been closer to 10%.

My conclusion is that the SNB deliberately screwed the market, and in the process shot itself in the foot for 30-50 billion dollars. What were they thinking?

Did the 2014 Profits Play a Role in this?

Every January the SNB produces its annual profit and loss results. The surprise in 2014 was the size of the gains the SNB reported (CHF38B) . The headline from this year's profit report:

38B Francs is a huge amount of money. This treasure chest is equal to about half of the losses the SNB incurred when it floated the franc. My question is did the folks at the SNB already know that they were going to pull the plug on the peg on January 9 when they released the profit report?

The huge profit report plays into the story, but I'm not sure if the way it was introduced allows for a definitive conclusion that the decision to float had been made six days before the actual event. My read of these tea leaves is that the SNB was, at a minimum, considering the float on January 9,but had not yet made a final decision on when to act. The "profits" gave the SNB the ammo to take the huge loss. My question - Were the 2014 "profits" pumped up so that it would be "easier" for the SNB to act? I think there is a real possibility that those big gains were largely fluff.

On the SNB communication of January 6th

A very curious element in this is that three days before the float an SNB spokesperson, Jean-Pierre Danthine, had this to say:

"We took stock of the situation less than a month ago, we looked again at all the parameters and we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy,"

What to make of this? Was Jean-Pierre lying through his teeth when he said these words? Had the decision to float already been made?

I'm 100% convinced that the decision to float was made prior to the time that J.P. spoke. In other words J.P. lied; he was part of a deliberate effort to set the market up to be short the CHF and to cause the maximum amount of pain to the market participants.

I doubt we will ever know the facts on this. However if JP was tied down and water boarded he might fess up to being the guy who deliberately set up the market. I'm as certain as I can be that good old J.P. would not have said these words without the blessings of the head of the SNB, Thomas Jordan. So it is quite possible that this critical lie was set up by the guy who is running the show.

If this is correct, it is a heinous act. I would think that there would be lawsuits if it could be proven that the SNB deliberately set up the market - billions were lost as result of the J.P. statement. (where is that water-board when you need it?)

Jordan Acts Old School Style

Jordan must have read from Paul Volker's playbook. Volker was famous for his "surprises". During those years I was on an FX trading desk. We were always afraid of the "Volker Factor". Markets were under siege by the Fed. As a result positioning was kept light, and market liquidity suffered. The "fear factor" worked to Volker's advantage, but even he would would admit that he was responsible for a great sucking noise in the markets. Volker succeeded, but the costs were very high.

Central Bank communication policy has morphed over the past 20 years. The changes were led by Greenspan who established the concept of 'guidance'. The Fed became more open as a result. By communicating its intentions the Fed was able to steer capital markets in a way that suited it. The strategy of communication was designed to minimize the market shocks of unanticipated policy changes. For the most part, the policy of providing forward guidance has worked. Ben Bernanke took another leg up on the idea of communication as a means of guiding markets. Most other central banks have followed this policy.

But the SNB went entirely in the other direction. On Tuesday it said, "That will not happen", three days later it happened. Thomas Jordan and his merry men at the SNB turned the clocks back 40 years.

There was No Crisis on Thursday

When the SNB established the Peg in 2011 there was a true market crisis going on. In a short period of time the EURCHF fell from 1.5 to parity. The SNB introduced the Peg in the same manner that they have taken it off. It came as a surprise to the market, it caused an immediate 20% jump in the EURCHF. Pretty much the exact opposite of what happened on Thursday. One could argue that if the SNB went "Shock and Awe" when the peg was established, it is equally fair that they took it off with the same Shock and Awe.

BUT - There was no market panic last Thursday. There was no crisis that forced the SNB to act on that day. The EURCHF was trading above the peg, it had been for days prior. The SNB had some bids in the market to ensure that there was no move to the 1.2000 level. The intervention required to maintain the Peg in the days just prior to the float was very small - under 10b CHF.

My point is that there was no compelling reason to act on a Thursday. Therefore the only conclusion I can draw is that the SNB acted in a malicious way. It took actions with the express intent of hurting the markets. It achieved its objectives. In the process the SNB incurred losses that are 50% higher then they might have otherwise taken.

What are the Other CBs Thinking?

As of last Tursday every Central Bank on the globe hates the SNB. Not only did the SNB destroy its own credibility, it undermined the credibility of every other CB. How many headlines like this have we seen the past few day? (hundreds).

I'm convinced that the SNB move has put the ECB (Mario Draghi in particular) in a very difficult position. I expect that we will see markets converging on the ECB in the not too distant future. The empty promises of Uncle Mario are now just that - empty promises. Draghi's job has just become incredibly more difficult - if not impossible.

The Japanese CB is now quaking. They have just observed first hand what happens when CBs take a U-turn. The BoJ has made more promises than any other CB. If the markets come to doubt the resolve and promises of the BoJ then you can kiss off any chance that the BoJ will succeed. A loss of confidence means that Japan will soon slip into another lost decade.

Any CB who is now managing a fixed currency is at risk. Hong Kong, China and Korea come to mind. If (when) any of these CBs come under attack they will face the same fate as the Swiss. The reality is that the global markets are much larger and more powerful than the CBs. What happened in Switzerland will be repeated elsewhere. It's likely that these attacks will happen fairly soon.

What About the Players?

I do feel a bit sorry for those who lost big on the CHF move. I think they were set up, and lied to by the SNB. If the SNB had acted on a Sunday we would not be reading about all of the retail losses. The same is true for the big banks that got whacked (JPM, Citi, Deutsche, Barclays, and the many more will soon be fessing.

But - The losers were idiots! What were those thousands of retail investors thinking? In any market a player must think about risk and reward. The "reward" of being long the EURCHF on Thursday was maybe 25BP. This was obvious as the EURCHF had traded the last three days a few ticks away from the intervention zone. There were caution flags flying. Anyone who thought there was some free money on the table made a huge mistake. The downside risks of the short CHF was at least 100Xs what might have been realized if the SNB had not acted. YOU NEVER DO THIS! Never take a 100 to one shot. To bet $100 to make $1 is just stupid.

The retail brokers providing FX executions for retail have been buried with losses. I couldn't be happier with this result. These clowns were providing 50X leverage to unsophisticated investors who did not understand the risks? They deserve to be wiped out.

There might be a few of these brokers left standing in a week - but I promise you the the days 2% margins on retail FX are over. Want to play in the FX sandbox? Be prepared to put 20% down. There are no profits left with that leverage, so the retail FX biz will disappear for a few years. (It will come back - greed trumps logic every time.)

 http://www.zerohedge.com/news/2015-01-18/snb-post-mortem

Russia Drastically Reduces Gas Supply – EU Warns “Completely Unacceptable”

Russia Drastically Reduces Gas Supply – EU Warns “Completely Unacceptable”

Vladimir Putin has ordered the Russian state energy giant Gazprom to cut natural gas supplies to and through Ukraine to the EU in a little reported move. It took place late on Wednesday and was overshadowed by the Swiss National Bank market turmoil yesterday.

Russian Prime Minister Putin instructs Gazprom chairman Alexei Miller during a meeting yesterday

Russia has shut off gas supplies through Ukraine to six EU states, ostensibly due to Ukraine’s alleged illegal siphoning gas from the pipeline. The European Union warned that the sudden cut-off to some of its member countries was ‘completely unacceptable’. The move comes just as winter begins to bite across Europe.

The pipeline crossing Ukraine supplies over 60% of the entire EU’s natural gas. Six countries – Greece, Bulgaria, Macedonia, Croatia, Romania and Turkey – report a complete halt of gas coming in from Russia.

Yesterday, Ukraine confirmed that Russia had completely cut off their supply. Croatia said it was temporarily reducing supplies to industrial customers while Bulgaria said it had enough gas only ‘for a few days’ and was already in a ‘crisis situation’.

There is the risk of an energy crisis and it is worrying that the move comes about at a time of increased maneuverings and posturing by NATO and the Russian army and deepening conflict in Ukraine.

Ukraine lurched back toward full-scale conflict today as troops loyal to the new Ukraine government battled with pro-Russian forces for control of an eastern airport.

Ukraine said yesterday that cease fire violations have surged to a new record, while the nation’s security council warned the unrest may spark a “continental war” and German Chancellor Angela Merkel called for emergency talks.

Russia is planning to divert it’s EU bound natural gas to a pipeline through Turkey opening at the Turkey-Greece border. Bloomberg quotes Valentin Zemlyansky of the Ukrainian gas company Naftogaz,  “They [the Russians] have reduced deliveries to 92 million cubic metres per 24 hours compared to the promised 221 million cubic metres without explanation,”

“We do not understand how we will deliver gas to Europe. This means that in a few hours problems with supplies to Europe will begin.”

Russian Energy Minister, Alexander Novak put it bluntly, “The decision has been made. We are diversifying and eliminating the risks of unreliable countries that caused problems in past years, including for European consumers.”

Bloomberg reports, “Gazprom, the world’s biggest natural gas supplier, plans to send 63 billion cubic meters through a proposed link under the Black Sea to Turkey, fully replacing shipments via Ukraine, Chief Executive Officer Alexey Miller said during the discussions.”

“We have informed our European partners, and now it is up to them to put in place the necessary infrastructure starting from the Turkish-Greek border,” Miller said.

Such a project would likely take months to implement. In the mean-time many Europeans may not have access to gas to warm their homes through winter and many industries will also be without gas – effecting production, employment in already struggling economies.

Whether or not Russia is calling Europe’s bluff in a bid to ease sanctions is unclear at this point. It appears that Turkey, an erstwhile NATO member, is warming to Russia, possibly due to the instability that western actions in the Middle East have brought to Turkey’s doorstep.

Earlier this week Turkish President Erdogan made the stunning accusation that “the West” staged the attacks in Paris last week.

The French, also, have been considering a foreign policy independent of the NATO status-quo. France is in the process of completing two battle ships for sale to Russia. Earlier this month President Hollande stated that sanctions against Russia should be lifted.

Tensions and suspicions are escalating even within the Western block. The EU does not have many cards left to play in dealing with Russia.

Tensions in the EU may arise as natural gas required for industry may have to be diverted to households to avoid social upheaval.

Geopolitical tensions are escalating across the world, concurrent with indications of an imminent and severe recession globally.

Gold has played an important role in protecting peoples wealth in uncertain times and will do so again in the coming years.

Knowledge is power. Below are some of our most popular guides in recent months

http://www.zerohedge.com/news/2015-01-16/russia-drastically-reduces-gas-supply-%E2%80%93-eu-warns-%E2%80%9Ccompletely-unacceptable%E2%80%9D

Mayhem Erupts on Trading Floors After Swiss Central Bank Removes Cap on Franc

At 9:30 a.m. today, trading floors across the City of London erupted.

Outbursts of obscenities and confusion followed the Swiss central bank’s surprise decision to abolish its three-year-old policy of capping the Swiss franc against the euro, according to traders in London’s financial district. The U-turn sent the franc as much as 41 percent up against the euro, the biggest gain on record, a move that one trader estimated may cause billions of dollars of losses for banks and their customers.

Dealers at banks including Deutsche Bank AG (DBK), UBS Group AG (UBSG) andGoldman Sachs (GS) Group Inc. battled to process orders amid a flood of customer calls and trade requests, according to people with direct knowledge of the events. At least one electronic currency-trading system temporarily halted transactions, adding to the mayhem.

“This is the biggest currency shocker in years and it’s likely to create more volatility in the short term,” said James Stanton, head of foreign exchange at deVere Group, a financial adviser that oversees about $10 billion. “Trading positions are extremely vulnerable and volume has gone through the roof.”

Deutsche Bank was among currency dealers to suffer disruptions to electronic trading, with its Autobahn platform temporarily ceasing to provide quotes, according to a dealer from outside the bank. The Frankfurt-based lender is among the four biggest dealers in the $5.3 trillion-a-day foreign-exchange market, along with Citigroup Inc.,Barclays Plc (BARC) and UBS, according to Euromoney Institutional Investor.

Market Tailspin

Spokesmen for Deutsche Bank, Zurich-based UBS and New York-based Goldman Sachs declined to comment. Some of the bankers interviewed for this story asked not to be identified as they weren’t authorized by their firms to speak publicly.

Sitting in front of their screens, dealers around the globe watched the franc hit 1.10 versus the euro, before surging to parity and reaching a record 0.8517 as the SNB dropped its commitment to defend the ceiling introduced in 2011. The Swiss currency jumped as much as 38 percent against the dollar while volatility climbed to the highest in more than a year.

“The move caught everyone off guard,” said David Madden, an analyst at IG Group Holdings Plc (IGG), which takes bets on financial markets under the IG Index name. “The Swiss central bank has sent the markets into a tailspin.”

As the franc spiked, investors said they found themselves unable to trade it amid a lack of price quotes.

‘No Liquidity’

“There was a good hour when euro-swiss was untradeable,” said Chris Morrison, London-based head of strategy at Omni Macro Fund, a hedge fund which oversees $550 million. “Clearly there was no liquidity.”

Forex.com, a currency-trading website, said it halted services briefly “until we get confirmation from our liquidity providers that we can get Swissie liquidity.” Dealing resumed at about 10:30 a.m. London time.

Spread-betters were also hit. IG Group said in a statement the SNB’s move will cost the firm as much as 30 million pounds ($46 million).

The turmoil forced top bankers to clear their diaries. At Citigroup Inc. (C), Steven Englander, global head of G-10 foreign-exchange strategy, had all his meetings canceled following today’s decision, according to a person with knowledge of the matter.

‘Red Faces’

With the franc largely frozen against the euro since the SNB introduced the ceiling, the turmoil may have left some investors with losses so large they could even be forced to close, according to a trader at one bank who asked not to be identified.

Anthony Peters, a broker at Swiss Investment Corp., said firms that were selling options tied to the Swiss franc may be among today’s losers. They would have lost money as volatility surged.

“Selling puts or vol on the franc was deemed to be SNB guaranteed money for old rope,” he wrote in a note to clients today. “There will be some very red faces around as it begins to transpire who should not have been playing that game.”

http://www.bloomberg.com/news/2015-01-15/mayhem-erupts-on-trading-floors-after-snb-s-currency-shocker-.html

Open a Forex Account and trade the CHF

Open a Forex Account with Pepperstone

Click here to open an account with Pepperstone

.

For other broker options - see OpenForexAccount.com

Forex domains for sale

Forex domains for sale:

www.ctaresults.com

www.eesfx.com

www.forexlinkexchange.com

www.trade.net.nz

www.forexsynthesis.com

www.forex-automatic-trading-systems.com

www.elite.com.mt 

www.openforexaccount.com 

If you are interested in purchasing these domains at premium fair value please contact us first so we can arrange payment, and then purchase a transfer here at FX System Hosting.  Once we receive payment we will unlock the domains and proceed with the transfer.  They are sold individually.

Each domain is valued individually - all have high SEO value for Forex companies, money managers, signal providers, or Forex brokers.

FX System Hosting now also offers new Internationalized Domain Names.  Get a free year with any domain transfer!

The First Shale Casualty: WBH Energy Files For Bankruptcy; Many More Coming

"There are too many ugly balance sheets," warns one energy industry analyst, adding simply that "the group is not positioned for this downturn." While the mainstream media continues to chant the happy-clappy side of lower oil prices, spewing various 'statistics' about how the down-side of low oil prices is 'contained' and the huge colossal massive tax cut means 'everything is awesome' for America, the data - and now actions - do not bear this out. Macro data has done nothing but disappoint and now, we have the first casualty of the shale oil leverage debacle as WSJ reports, on Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money. There are many more to come...

In December we illustrated the problem names (in the publicly traded markets) among the most-levered energy companies in America...

And now, as The Wall Street Journal reports, the bankruptcies have begun as financing costs are not just prohibitive, there is no liquiidty available at any price for many...

American oil and gas companies have gone heavily into debt during the energy boom, increasing their borrowings by 55% since 2010, to almost $200 billion.

Their need to service that debt helps explain why U.S. producers plan to continue pumping oil even as crude trades for less than $50 a barrel, down 55% since last June.

But signs of strain are building in the oil patch, where revenue growth hasn’t kept pace with borrowing. On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money and citing debt of between $10 million and $50 million. Neither the Austin-based company nor its lawyers responded to requests for comment.

Energy analysts warn defaults could be coming. “The group is not positioned for this downturn,” said Daniel Katzenberg, an analyst at Robert W. Baird & Co. “There are too many ugly balance sheets.”

...

In 2010, U.S. companies focused on producing oil and gas had $128 billion in combined total debt, according to financial data collected by S&P Capital IQ.

As of their latest quarter, such companies had $199 billion of combined total debt.

Before crude prices began falling, U.S. oil and gas producers were able to acquire leases and drill wells even if that meant outspending their incomes. Debt was used to bridge the cash shortfall so that companies could develop oil fields in Texas, North Dakota and newer locations including Colorado.

Now that is coming back to bite.

The upshot of cash conservation and higher borrowing costs will be less money spent on producing oil and natural gas.Concho Resources Inc. said late Monday that it was cutting its capital spending budget by a third, to $2 billion.

*  *  *

And the credit market knows it...

http://www.zerohedge.com/news/2015-01-07/first-shale-casualty-wbh-energy-files-bankruptcy-many-more-coming 

Fed's Evans "Catastrophe" Comment Sparks US, Japan Stock Surge; China Purge

Chicago Fed's Charlie Evans appears to have decided to flex his voting member status, Bullard-ness this evening. Speaking during a forum in Chicago, after The FOMC Minutes showed data-dependence was the thing... Evans exclaimed "raising rates would be a catastrophe," and that "housing hasn't shown the strength he'd like to see," prompting S&P futures - with the help of USDJPY - to suddenly surge 16 points (and drag WTI Crude futures above $49.50 for fun). Nikkei futures enjoyed the ride ramping 200 points as USDJPY hit 119.70. But, much to the chagrin of the millions of freshly minted retail investors there, Chinese stocks plunged 2.2%... "we love the smell of stability in the Asian morning"

Evans explains...

• *FED'S EVANS SAYS RAISING RATES WOULD BE A CATASTROPHE
• *EVANS SAYS OIL IMPACT ON INFLATION TO REQUIRE CLOSE MONITORING
• *EVANS SAYS WAGE GROWTH CONSISTENT WITH GOAL WOULD BE 3.5%-4%
• *EVANS: DROP IN LONG-TERM INTEREST RATES `EXTRAORDINARY' PAST YR
• *EVANS SAYS HOUSING HASN'T SHOWN STRENGTH HE'D LIKE TO SEE

And thus the fun-durr-mentals kick in...

and in Japan...

But not so much in China...

So to summarize - a Dovish Dove said Dovish things that he has said a thousand times before, contradicting a modestly hawkish biased FOMC and markets explode in a fit of illiquid exuberance...? Okeydokey, let's just see what happens when Europe opens

http://www.zerohedge.com/news/2015-01-07/feds-evans-catastrophe-comment-sparks-us-japan-stock-surge-china-purge

Will 2015 Be A Year Of Economic Disaster? 11 Perspectives

Submitted by Michael Snyder via The Economic Collapse blog,

Will 2015 be a year of financial crashes, economic chaos and the start of the next great worldwide depression?  Over the past couple of years, we have all watched as global financial bubbles have gotten larger and larger.  Despite predictions that they could burst at any time, they have just continued to expand.  But just like we witnessed in 2001 and 2008, all financial bubbles come to an end at some point, and when they do implode the pain can be extreme.

Personally, I am entirely convinced that the financial markets are more primed for a financial collapse now than they have been at any other time since the last crisis happened nearly seven years ago.  And I am certainly not alone.  At this point, the warning cries have become a deafening roar as a whole host of prominent voices have stepped forward to sound the alarm.  The following are 11 predictions of economic disaster in 2015 from top experts all over the globe…

#1 Bill Fleckenstein: “They are trying to make the stock market go up and drag the economy along with it. It’s not going to work. There’s going to be a big accident. When people realize that it’s all a charade, the dollar will tank, the stock market will tank, and hopefully bond markets will tank. Gold will rally in that period of time because it’s done what it’s done because people have assumed complete infallibility on the part of the central bankers.”

#2 John Ficenec: “In the US, Professor Robert Shiller’s cyclically adjusted price earnings ratio – or Shiller CAPE – for the S&P 500 is currently at 27.2, some 64pc above the historic average of 16.6. On only three occasions since 1882 has it been higher – in 1929, 2000 and 2007.”

#3 Ambrose Evans-Pritchard, one of the most respected economic journalists on the entire planet: “The eurozone will be in deflation by February, forlornly trying to ignite its damp wood by rubbing stones. Real interest rates will ratchet higher. The debt load will continue to rise at a faster pace than nominal GDP across Club Med. The region will sink deeper into a compound interest trap.”

#4 The Jerome Levy Forecasting Center, which correctly predicted the bursting of the subprime mortgage bubble in 2007: “Clearly the direction of most of the recent global economic news suggests movement toward a 2015 downturn.”

#5 Paul Craig Roberts: “At any time the Western house of cards could collapse. It (the financial system) is a house of cards. There are no economic fundamentals that support stock prices — the Dow Jones. There are no economic fundamentals that support the strong dollar…”

#6 David Tice: “I have the same kind of feel in ’98 and ’99; also ’05 and ’06.  This is going to end badly. I have every confidence in the world.”

#7 Liz Capo McCormick and Susanne Walker: “Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending.”

#8 Phoenix Capital Research: “Just about everything will be hit as well. Most of the ‘recovery’ of the last five years has been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more ‘risk assets’ (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story.

If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system.”

#9 Rob Kirby: “What this breakdown in the crude oil price is going to spawn another financial crisis.  It will be tied to the junk debt that has been issued to finance the shale oil plays in North America.  It is reported to be in the area of half a trillion dollars worth of junk debt that is held largely on the books of large financial institutions in the western world.  When these bonds start to fail, they will jeopardize the future of these financial institutions.  I do believe that will be the signal for the Fed to come riding to the rescue with QE4.  I also think QE4 is likely going to be accompanied by bank bail-ins because we all know all western world countries have adopted bail-in legislation in their most recent budgets.  The financial elites are engineering the excuse for their next round of money printing . . .  and they will be confiscating money out of savings accounts and pension accounts.  That’s what I think is coming in the very near future.”

#10 John Ing: “The 2008 collapse was just a dress rehearsal compared to what the world is going to face this time around. This time we have governments which are even more highly leveraged than the private sector was.

So this time the collapse will be on a scale that is many magnitudes greater than what the world witnessed in 2008.”

#11 Gerald Celente: “What does the word confidence mean? Break it down. In this case confidence = con men and con game. That’s all it is. So people will lose confidence in the con men because they have already shown their cards. It’s a Ponzi scheme. So the con game is running out and they don’t have any more cards to play.

What are they going to do? They can’t raise interest rates. We saw what happened in the beginning of December when the equity markets started to unravel. So it will be a loss of confidence in the con game and the con game is soon coming to an end. That is when you are going to see panic on Wall Street and around the world.”

If you have been following my website, you know that I have been pointing to 2015 for quite some time now.

For example, in my article entitled “The Seven Year Cycle Of Economic Crashes That Everyone Is Talking About“, I discussed the pattern of financial crashes that we have witnessed every seven years that goes all the way back to the Great Depression.  The last two major stock market crashes began in 2001 and 2008, and now here we are seven years later.

Will the same pattern hold up once again?

In addition, there are many other economic cycles that seem to indicate that we are due for a major economic downturn.  I discussed quite a few of these theories in my article entitled “If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States“.

But just like in 2000 and 2007, there are a whole host of doubters that are fully convinced that the party can continue indefinitely.  Even though our economic fundamentals continue to get worse, our debt levels continue to grow and every objective measurement shows that Wall Street is more reckless and more vulnerable to collapse than ever before, they mock the idea that a financial collapse is imminent.

So let’s see what happens in 2015.

I have a feeling that it is going to be an extremely “interesting” year.

http://www.zerohedge.com/news/2015-01-06/will-2015-be-year-economic-disaster-11-perspectives