Why the US economy keeps defying the odds Why the US economy keeps defying the odds
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On another note we paid $3.22 per gallon today at HEB.
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Brent opened at ~$84/bbl so prices should settle a bit more.
I leave Saturday for my 2 weeks in So Padre. We do a lot of driving. This makes me happier than I already am.
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This is just wild to me. The combination of oil stocks at Cushing, the SPR and domestic refineries is at its lowest point in many years, and other countries are in the same boat.
I know that global demand has decreased a bit, but the market fundamentals don’t support oil prices dropping that much. Doesn’t make sense.
Right now the price you see, $77/bbl is for July delivery
I don’t have access to all the price sets anymore. Dated Brent had outpaced futures by quite a bit but not sure if that’s narrowed.
That said, some weird stuff has been going on in oil markets for a while.
I understand that. The global oil market isn’t going to magically recover all of those “lost” barrels in the next 4-6 weeks. There’s an actual physical shortage of produced oil (as compared to “normal” flow") in the market.
The release of reserves has softened that shortage, but that has to stop soon so that those reserves can be replenished, and global production will take a while to catch up. US production isn’t going to materially increase, Russia is constrained by infrastructure damage, and the Middle East also has repairs to make just to get back to previous levels.
This is a fundamental production shortfall that has historically resulted in rising prices. It doesn’t make sense for the market to ignore that.
This is part of the reason why I said oil companies didn’t like the recent geopolitical increase in prices.
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Yeah, those that weren’t hedged will at least enjoy a more profitable quarter, but it comes at the expense of long-term price stability.
But that “demand destruction” has a way of turning back the other way when prices and availability get straightened out.
The good news for the oil industry is that it will take some time for the supply and reserves numbers to get back to “normal,” which should keep prices higher.
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For months, markets have been hand-wringing about private credit while quietly ignoring the obvious: equity sits below debt. Always has. “If you’re worried about private credit, and a lot of people are, you should be really worried about private equity,” I wrote in March.
Ninety-eight percent of the loans in Apollo’s flagship private-credit fund are at the absolute top of the capital stack. At Blackstone, it’s 90%. Before these firms lose a dollar, the private-equity firms that own the companies they lent to will see their positions wiped out. It’s called first-loss for a reason.
Now, the cascade of financial loss that happens when companies run out of money is in motion.
Medallia, a software company that runs customer-satisfaction polls, was turned over to its lenders yesterday after being unable to pay its debt. In one of the biggest private-equity goose eggs on record, Thoma Bravo will lose its entire $5 billion equity stake. This is how it’s supposed to work. Equityholders, whether they are PE shops or public stockholders, bear the first loss when things go south. They are rewarded for bearing that risk with unlimited upside when things go well. Lenders, meanwhile, are more protected from wipeouts, but can only get their money back, plus a little interest, if the company thrives.
Equally encouraging is how Medallia’s lenders, led by Blackstone, handled it. For months they allowed the company to pay interest in scrip — a kick-the-can approach that adds to the amount owed rather than collecting cash — but eventually they stopped extending the fantasy of a turnaround. That’s a functioning credit market doing what it should.
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That was one of the original big buildings built in Galleria area in
the 70’s I think. May be full of asbestos if so and make any attempt to
convert to housing too expensive.
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