CultureCitizen
Silver Member
- Jun 1, 2013
- 1,932
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What I can see is the following scenario :
Oil prices are going down. Some oil produces will be hedged. So the oil crisis will cascade into hedge contracts. Then banks loose solvency and will either require a second bail out or may be able to integrate other funds ( e.g. pension funds and other mid term investments ) into their capital structure.
After that I'm not sure what will happen but the mid term prediction is :
- Crash of the oil companies -> layoffs
- Oil notes crash
- Bank crash
- Either a second rescue or liabilities integrated into the banking capital structure.
Now , the question is not if I'm paranoid or not ( because I am ) the question is if I'm paranoid enough.
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Edit : References for your viewing pleasure
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Oil price slump sorts the hedged from the unhedged Reuters
Mexico s tremendous hedge Oil is falling but this big producer isn t worried
"Much of the recent energy boom has been financed with junk debt and a good portion of that junk debt ended up in collateralized loan obligations. CLOs are also big users of credit default swaps, which was an important target of the Dodd Frank push-out. In addition, over the past 6 months banks were unable to unload a portion of the junk debt originated and so it remained on bank balance sheets. That debt is now substantially underwater. To hedge, banks are using CDS. Hedge funds are actively shorting these junk debt financed energy companies using CDS (it’s unclear where the long side of those CDS have ended up – probably bank balance sheets and CLOs)."
Did Wall Street Need to Win the Derivatives Budget Fight to Hedge Against Oil Plunge naked capitalism
Oil prices are going down. Some oil produces will be hedged. So the oil crisis will cascade into hedge contracts. Then banks loose solvency and will either require a second bail out or may be able to integrate other funds ( e.g. pension funds and other mid term investments ) into their capital structure.
After that I'm not sure what will happen but the mid term prediction is :
- Crash of the oil companies -> layoffs
- Oil notes crash
- Bank crash
- Either a second rescue or liabilities integrated into the banking capital structure.
Now , the question is not if I'm paranoid or not ( because I am ) the question is if I'm paranoid enough.
=============================================================
Edit : References for your viewing pleasure
=============================================================
Oil price slump sorts the hedged from the unhedged Reuters
Mexico s tremendous hedge Oil is falling but this big producer isn t worried
"Much of the recent energy boom has been financed with junk debt and a good portion of that junk debt ended up in collateralized loan obligations. CLOs are also big users of credit default swaps, which was an important target of the Dodd Frank push-out. In addition, over the past 6 months banks were unable to unload a portion of the junk debt originated and so it remained on bank balance sheets. That debt is now substantially underwater. To hedge, banks are using CDS. Hedge funds are actively shorting these junk debt financed energy companies using CDS (it’s unclear where the long side of those CDS have ended up – probably bank balance sheets and CLOs)."
Did Wall Street Need to Win the Derivatives Budget Fight to Hedge Against Oil Plunge naked capitalism
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