Current issues with the market - Any ideas on avoiding the end?
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- May 5, 2022
I know the 10 year yield going up means usually higher risk in the more "risky" markets (MBS comes to mind), but what does this volatility mean? Uncertainty about the state of the market? Some big hedge funds playing gayops with the smaller day traders? Fed doing something retarded while saying something smart sounding?
- Joined
- Jul 18, 2017
Holy shit.
European energy trading is being strained by margin calls of at least $1.5 trillion, putting pressure on governments to provide more liquidity buffers, according to Norway’s Equinor ASA.
Aside from fanning inflation, the biggest energy crisis in decades is sucking up capital to guarantee trades amid wild price swings. That’s pushing European Union officials to intervene to prevent energy markets from stalling, while governments across the region are stepping in to backstop struggling utilities. Finland has warned of a “Lehman Brothers” moment, with power companies facing sudden cash shortages.
“Liquidity support is going to be needed,” Helge Haugane, Equinor’s senior vice president for gas and power, said in an interview. The issue is focused on derivatives trading, while the physical market is functioning, he said, adding that the energy company’s estimate for $1.5 trillion to prop up so-called paper trading is “conservative.”
Read more: Europe’s Lehman Warning on Energy Prompts Flurry of Cash Help
Many companies are finding it increasingly difficult to manage margin calls, an exchange requirement for extra collateral to guarantee trading positions when prices rise. That’s forcing utilities to secure multi-billion euro credit lines, while rising interest rates add to costs.
“This is just capital that is dead and tied up in margin calls,” Haugane said in an interview at the Gastech conference in Milan. “If the companies need to put up that much money, that means liquidity in the market dries up and this is not good for this part of the gas markets.”
So far Germany has introduced Europe’s biggest scheme to backstop companies affected by the fallout of the war in Ukraine, setting aside 7 billion euros in loans to be made available to companies facing liquidity issues. German energy giant Uniper SE last week sought an extra 4 billion euros after fully using a 9 billion-euro existing facility, while Austria extended a 2 billion-euro credit to cover the trading positions of Vienna’s municipal power utility.
Finland and Sweden announced a $33 billion emergency liquidity facility Sunday to backstop utilities through loans and credit guarantees.
EU plans to intervene would be “sensible” for derivatives trading, Haugane said. Among the emergency interventions being discussed by the EU are price caps in power and gas markets. For Equinor, price caps in electricity could make sense, because power markets are more localized.
But in gas, such measures would be extremely difficult due to the global nature of the market. For example, Europe has to beat Asia on price to attract liquefied natural gas cargoes.
“Power is a local, i.e. domestic, market, so in this case it would be possible to do something governments could control,” Haugane said. “But the issue of a gas price cap is different, because the natural gas market is global, and hence not that easy to manage.”
The underlying issue of the gas market is a lack of supply, and price caps won’t ease the strain or add to reserves, according to the Equinor executive.
“It doesn’t create any solution to the problem,” Haugane said. “Gas is a global commodity, and we don’t have that much supply so there is not much we can do.”
The European Commission is also examining measures to help with liquidity. These could include credit lines from the European Central Bank, new products as margin collateral, and temporary suspensions of derivatives markets, according to a policy background paper seen by Bloomberg News.
Still, there was some optimism at Gastech in Milan that the liquidity issues will be ultimately resolved.
“The recapitalization of the industry and re-balancing of portfolios is a question of quarters and not years,” Feygin said in an interview at Gastech. “The bridge financing has been available to date. So far everyone has managed to find a way because the industry ultimately performs: the physical volumes are delivered and the financial positions have been settled.”
In the future, market participants would probably lean toward large credit-worthy players, he said.
Likewise, the liquidity crisis has largely spared biggest trading houses, which are profiting from price volatility, while utilities bear most of the shocks, said Charif Souki, chairman of US LNG developer Tellurian Inc.
“I have not seen any of the major trading houses have a liquidity issue, they all managed to find lines of credits and bank facilities and they are all making more money than they have ever made,” Souki said in an interview at Gastech. “For the utilities in Europe, it is a serious issue because they are buying gas that is now all of the sudden is extremely expensive, and they are regulated by their respective governments.”
Energy Trading Stressed by Margin Calls of $1.5 Trillion
European energy trading is being strained by margin calls of at least $1.5 trillion, putting pressure on governments to provide more liquidity buffers, according to Norway’s Equinor ASA.
Aside from fanning inflation, the biggest energy crisis in decades is sucking up capital to guarantee trades amid wild price swings. That’s pushing European Union officials to intervene to prevent energy markets from stalling, while governments across the region are stepping in to backstop struggling utilities. Finland has warned of a “Lehman Brothers” moment, with power companies facing sudden cash shortages.
“Liquidity support is going to be needed,” Helge Haugane, Equinor’s senior vice president for gas and power, said in an interview. The issue is focused on derivatives trading, while the physical market is functioning, he said, adding that the energy company’s estimate for $1.5 trillion to prop up so-called paper trading is “conservative.”
Read more: Europe’s Lehman Warning on Energy Prompts Flurry of Cash Help
Many companies are finding it increasingly difficult to manage margin calls, an exchange requirement for extra collateral to guarantee trading positions when prices rise. That’s forcing utilities to secure multi-billion euro credit lines, while rising interest rates add to costs.
“This is just capital that is dead and tied up in margin calls,” Haugane said in an interview at the Gastech conference in Milan. “If the companies need to put up that much money, that means liquidity in the market dries up and this is not good for this part of the gas markets.”
So far Germany has introduced Europe’s biggest scheme to backstop companies affected by the fallout of the war in Ukraine, setting aside 7 billion euros in loans to be made available to companies facing liquidity issues. German energy giant Uniper SE last week sought an extra 4 billion euros after fully using a 9 billion-euro existing facility, while Austria extended a 2 billion-euro credit to cover the trading positions of Vienna’s municipal power utility.
Finland and Sweden announced a $33 billion emergency liquidity facility Sunday to backstop utilities through loans and credit guarantees.
EU plans to intervene would be “sensible” for derivatives trading, Haugane said. Among the emergency interventions being discussed by the EU are price caps in power and gas markets. For Equinor, price caps in electricity could make sense, because power markets are more localized.
But in gas, such measures would be extremely difficult due to the global nature of the market. For example, Europe has to beat Asia on price to attract liquefied natural gas cargoes.
“Power is a local, i.e. domestic, market, so in this case it would be possible to do something governments could control,” Haugane said. “But the issue of a gas price cap is different, because the natural gas market is global, and hence not that easy to manage.”
The underlying issue of the gas market is a lack of supply, and price caps won’t ease the strain or add to reserves, according to the Equinor executive.
“It doesn’t create any solution to the problem,” Haugane said. “Gas is a global commodity, and we don’t have that much supply so there is not much we can do.”
The European Commission is also examining measures to help with liquidity. These could include credit lines from the European Central Bank, new products as margin collateral, and temporary suspensions of derivatives markets, according to a policy background paper seen by Bloomberg News.
Energy Crunch
The surge in gas prices over the past two years has produced a crunch not dissimilar to the financial crisis, said Anatol Feygin, chief commercial officer at Cheniere Energy Inc., the biggest US liquefied natural gas exporter. “There are few places to look other than central banks” for help, he said.Still, there was some optimism at Gastech in Milan that the liquidity issues will be ultimately resolved.
“The recapitalization of the industry and re-balancing of portfolios is a question of quarters and not years,” Feygin said in an interview at Gastech. “The bridge financing has been available to date. So far everyone has managed to find a way because the industry ultimately performs: the physical volumes are delivered and the financial positions have been settled.”
In the future, market participants would probably lean toward large credit-worthy players, he said.
Likewise, the liquidity crisis has largely spared biggest trading houses, which are profiting from price volatility, while utilities bear most of the shocks, said Charif Souki, chairman of US LNG developer Tellurian Inc.
“I have not seen any of the major trading houses have a liquidity issue, they all managed to find lines of credits and bank facilities and they are all making more money than they have ever made,” Souki said in an interview at Gastech. “For the utilities in Europe, it is a serious issue because they are buying gas that is now all of the sudden is extremely expensive, and they are regulated by their respective governments.”
- Joined
- Feb 22, 2020
Reply bug..
Next up: commodities traders.
Buckle your seat belts, it's gonna be a bumpy ride!
Next up: commodities traders.
Buckle your seat belts, it's gonna be a bumpy ride!
- Joined
- May 5, 2022
Dow is down 15% YTD. It'll be interesting because I'm not sure if they stock market is following the WSB motto of
"We Can Stay Retarded Longer Than You Can Stay Solvent"
Oh wait...
I don't know what to think even anymore. I think Nomura and GS are being too conservative.
In other news in my field...
Southern US agriculture (at least, the non mechanizable kind) continues to get assraped due to weather, lack of labor (and gov policies*), and price of land.
I knew one dude who's water bill was over 5,000 for a MONTH on less than an acre for his loading zone for his nursery op. I have a dread deep inside my heart that I feel that water is going to rocket up in price and then agriculture will be 100% fucked.
*They couldn't get Americans to work labor in ag, so they hired illegals (wetbacks) in the 2000s. Now it's a big federal felony, and the H-2A has a low limit, so you can't find people period.
I don't know how most of the nurseries are going to stay in business, there's severe pressure to adjust prices upwards but the government seems to not give a shit about this critical sector in the economy, no farms, no food.
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wtfNeedSignUp
kiwifarms.net
- Joined
- Dec 17, 2019
- Joined
- Dec 17, 2021
That's a level of retarded I've never imagined. They're also mulling over the idea of sanctions on China now, which if that happens currently the inflation rate will be well into double digits, and while I'm not pro-China by any means I know that the current administration won't gain shit off the sanctions just like the EU sanctioned Russia and proceeded to get fucked by their own retarded energy policy. It's one thing to impose tariffs if you have a plan to promote manufacturing in the USA, but I know they'll just throw out sanctions with no intention to change anything and then be shocked that everything is made in China after the fact.
- Joined
- May 5, 2022
China is currently debating to further extend the Zero-covid policy or kick Xi's ass out.
I guess the US "wins" on China sanctions since the majority of the US won't be hungry since the US exports a shit ton of food to China. Still gonna be major riots when nobody can get the newest funko pop. After all, these brainless idiots have never starved or met real challenges in life before.
I find it funny that all the major power players are hellbent on suicide right now. It is almost like they have forgotten the fire that warms also burns.
US: Trying to go for a hyper inflationary spiral, also niggers and diversity n' sheet cause huwite men bad!!!!
China: Zero covid even if we crash the economy!
Russia: Fighting some
EU: Слава Україні! Just ignore Bern's death from hypothermia, he was a Russian supporter!
Brazil: Lol
South Africa: Lol
India: Modi trying to push ethnic tensions because fuck anyone that's not Hindu.
- Joined
- Dec 17, 2021
The whole thing is quite the mess, and it will be interesting who comes out on top as so far it's been unexpected.
- Joined
- May 27, 2017
I placed a call debit spread on LNG on Sept 29th and I already got 26% return on options that expire on the 21st.
std::string
kiwifarms.net
- Joined
- May 17, 2018
If there's a global economic collapse then Shanghai and Shenzhen would make our riots look tame. Rural areas might be okay.
China's been planting a bunch of potatoes and trying to make them another staple crop though, and, well...how many Chinese dishes do you know that feature potatoes? It's the highest calorie density crop per acre though. They're prepping for something and that's sort of worrying me.
- Joined
- Jul 18, 2017
Everything I was freaking out about in the OP is starting to happen. Zombie companies are failing to honor debt obligations. Inflation is spiraling out of control and increasingly high debt to capital rates is burying otherwise healthy individuals, companies and governments.
Western governments have, with the quiet failure to report by captured state media, resorted to extreme measures to keep the ball rolling. The bank of England has issued a blank check, saying it will write whatever zeros are required after the 1 to keep pension funds afloat. In the USA, the Government is draining the strategic petroleum reserve to try and grapple with crippling consumer inflation while also making sweeping promises to forgive major debt obligations. With no explanation for how they intend to paper it over. Especially once the Strategic Gas reserve is empty.
We are in the end game now guys. It's been almost 2 years since I wrote this OP. But everything I freaked out about as being possible has now happened. Bail out NOW. If you have not already.
The kiwis shall inherit the earth.
Western governments have, with the quiet failure to report by captured state media, resorted to extreme measures to keep the ball rolling. The bank of England has issued a blank check, saying it will write whatever zeros are required after the 1 to keep pension funds afloat. In the USA, the Government is draining the strategic petroleum reserve to try and grapple with crippling consumer inflation while also making sweeping promises to forgive major debt obligations. With no explanation for how they intend to paper it over. Especially once the Strategic Gas reserve is empty.
We are in the end game now guys. It's been almost 2 years since I wrote this OP. But everything I freaked out about as being possible has now happened. Bail out NOW. If you have not already.
The kiwis shall inherit the earth.
- Joined
- May 5, 2022
Re: Potatoes.
Quite a few, most famous ones off my head or beef stew with potatos due a Mao quote 『土豆炖牛肉 不取放屁』 or "Potatoes stewed with beef, (You) aren't allowed to fart (Bullshit)!"
Also Spicy dry-fried chicken with potatoes, and potato slices (think noodle sized potatoes stir fried).
Economy is very not good in China right now. Family member went to eat and four dishes (different recipes) and a soup* was 70 RMB (~10 USD). It used to be around 200 (~30 USD) pre COVID.
I can't comment on this too much without getting a family member shot, but there are rumors that Xi will be releasing all the grain they have stored this winter. In regards to prepping, that's just a Chinese mentality thing.
Nobody is willing to spend in China because they don't like "debt" or at least the individual does not. So China is stuck in a great depression feedback loop. I know several families that could not afford electricity or water this year and had to borrow from other apartment members. That should tell you how effective 0 covid is at the economic suicide.
Xi will be elected barring some major incident between now and the 20th NPC, that is because if there was proper opposition, the NPC would not be held.
*Traditional "rich person" dinner/lunch is 3 dishes 1 soup.
Edit: I should also mention, there was a 50-75% (Numbers not clear, but it did seem to happen) paycut across all party functionaries below the province leadership level.
wtfNeedSignUp
kiwifarms.net
- Joined
- Dec 17, 2019
std::string
kiwifarms.net
- Joined
- May 17, 2018
Is there any other actual opposition other than the remnants of Jiang Zemin's cadre?
- Joined
- May 5, 2022
It's technically not his cadre, but rather just the Shanghai clique representing the merchant interests. Kinda like how Jews gravitate to banking, the stereotype of Shanghai is business.
The true opposition would probably be pragmatists and the (actual) communists (Who are trying to overthrow the CPC, which is hilarious but beside the point), since Xi is considered a "moderate" economically.
So aside from the independence movements, there's a pretty strong clique of protectionists not unlike the rust belt in the USA. These are the "Manchurian" faction (It lacks a name), since Manchuria has the following major industries:
-Heavy industry (Going downhill since light industry focus)
-Forestry (Lol what is Siberia)
-Mining (Lol what is Best Korea)
-Agriculture (Getting fucked by plains China + USA)
Southern China is the "Shanghai clique" and wants economic development and a generally "non-interference", believing that you have the win the economic war before the shooting one. "Pro-US" and oy veeeys.
Xi is the "old guard" faction that basically doesn't give a shit except their own power.
There is also the ultranationalist "Fuck anyone who ceeded land" who want the heads of the Shanghai cliques, and wants to crush India, Burma the CSTO, and invade Taiwan. They are a minority but in an alliance of convinence with Xi.
Chinese "Christians" are also a faction and deserve to be wiped from the face of the Earth imho. I really hate them because all they do is pressure you for money and the idea of Jesus "dying for your sin, so repent or die" is reprehensible to me.
Pro Russian faction got clowned on doesn't exist anymore since the Ukraine war and Russia's absolute shitshow. Lot's of pro Russian civlians who need to be laughed at for not knowing history.
Also a trans humanist faction pushing biotech on humans but gets clowned on because it threatens status quo.
- Joined
- Oct 31, 2019
... Into what? If you've got your iodine, your non-perishable food, your guns & ammo and your banjo then what? Holding rapidly-inflating money isn't going to benefit you. The stock market is a rigged game with Nancy Pelosi as the DM. Crypto has no value whatsoever past being a pseudo-stock that is now also collapsing. Precious metals are a meme. I have my own plans but I'm curious to hear what exactly you think people should be doing. We may as well ask since you were pretty accurate in the OP.
std::string
kiwifarms.net
- Joined
- May 17, 2018
The Han nationalists on Weibo scare the hell out of me. Like the minute the Russia-Ukraine stuff started they were like okay let's go reclaim Haishenwai.
Xi is good for global stability at least since he seems to be able to placate them without causing WW3.
- Joined
- Sep 28, 2022
An interesting anecdote but the brokerage where I have my personal portfolio called me today and when they heard I was indifferent to the market they kind of moved on without trying to upsell anything, and they said they were trying to help navigate people in the current market. It might just be an upsell still, looking for a specific demographic I don't fit, but I'm guessing their seeing some pain in small to medium sized client accounts fleeing that's harming them and that's a bit of a signal.