“I'm sort of a pessimist about tomorrow & an optimist about the day after tomorrow” - Eric Sevareid
MACRO / REG.
We see messes being made & regulators preparing for clean-up:
From Deutsche Bank to Bank of Oklahoma, loan loss reserves may be an issue again
Good news for them, the regulators are happy to provide relief
If the world backtracks from Basel 3, we won’t be surprised
Would you call that a Basel 2-Step?
Insurance is another animal - we can’t imagine that actuaries forecasted a scenario where corporate & health insurance markets were stressed this hard, globally
And if they did - and punted it to the re-insurers - well, it’s still a matter of stressed actuarial reserves
In any case, we’re expecting bailouts & stimulus packages of comical proportions -
The supply & price Oil is still half of our problems, and we don’t see this being resolved in the short term.
New developments in the price war include:
Saudi announced ANOTHER production increase
The UAE announced a 30% production increase
Russian E&Ps held firm, claiming to be fine with much lower prices
We think this is Aramco’s back-of-the-napkin revenue ($MM/day) math:
Yesterday - at close - Warren Buffett could’ve bought Shell, with Berkshire’s cash on hand…
To say that it’s been a long week is an understatement.
We don’t feel like knocking everyone while their down, so will move on to the other half of our problems - the Virus -
Over the last 6x weeks, we’ve beat this topic to death.
On Wednesday, it seems that much of the US adopted views similar to ours.
Better late than never -
We’ll leave you with 3x current pieces on the virus that we believe are worth reading:
From Tomas Pueyo - What to Do
From Elad Gil - Virus Update
And, Ohio has 5x confirmed cases, but estimates that 1% of Ohio has the virus
We bet on sports.
And that ended on Wednesday…
From Bryan Fischer:
Undrawn credit lines across the US were drawn over liquidity fears. Both banks & the Fed assured the market that liquidity would not be an issue:
Daniel Yergin’s take on the Virus+Oil
OFS is still getting squeezed
Post-OPEC+ fallout, tanker rates have spiked
Central Banks buying Equities bothers us
That’s it for this week - we’ll back Tuesday - we’re going to take a look at a few Oxy wells over weekend, to see what everyone is fussing about - be safe -