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Venezuela Is Down To Its Last $10B As Debt Payments Loom

Via Zainab Calcuttawala of OilPrice.com,

Venezuela’s central bank is down to its last $10.5 billion in foreign reserves, according to the institution’s most recent report on the country’s financials.

Over the remainder of 2017, Caracas needs to fund $7.2 billion in debt payments – an amount that it can only meet if oil prices spike far higher than the ongoing boosts caused by OPEC’s output reduction agreement.

Current reserves stand 66 percent lower than levels in 2011, when the government held $30 billion in foreign currencies to spend on loan repayments and other official business (and down 75% from 2008 highs)

“The question is: Where is the floor?” Siobhan Morden, head of Latin America fixed income strategy at Nomura Holdings, told CNN Money. “If oil prices stagnate and foreign reserves reach zero, then the clock is going to start on a default.”

Venezuela’s financial report for 2016 stated that roughly $7.7 billion of the remaining $10.5 billion in foreign reserves had been preserved in gold. Last year, in order to fulfill debt obligations, Caracas began shipping gold to Switzerland.

The drastic fall in oil prices in 2014 and widespread corruption have both caused an economic meltdown in the South American country, where citizens had become accustomed to imported goods paid for by fossil fuel revenues.

President Nicolas Maduro has resorted to opening the country’s border with Columbia to allow Venezuelans to purchase necessary medical and day-to-day supplies.

Venezuelan state-run oil company PDVSA’s default is probable, according to the ratings agency Fitch, which cited the oil giant’s weak liquidity position and high amortization scheduled for 2017 as the causes of the default problem last month.

“Should oil prices remain around current levels, average recovery may lead to additional future defaults to further reduce obligations and allow for necessary transfers to the government,” said Fitch’s senior director Lucas Aristizabal.

The company has projected that its oil production will maintain its 23-year-low in 2017.

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EPA Scraps Methane Emission Reporting Rule

The Environmental Protection Agency has removed an Obama-era rule that requires oil and gas companies to report methane emissions from oilfields – a rule that had prompted complaints from 11 oil and gas-producing states that argued it required too much work. The EPA’s new boss, climate change skeptic and former Oklahoma Attorney General Scott Pruitt, said the change was effective immediately, adding he will go on to assess whether the additional information that EPA required from energy companies under its previous management is indeed…


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Mexico Plans Two Annual Oil Tenders

Mexico is planning to hold two regular oil field auctions every year, beginning in 2018, aiming to stimulate more foreign energy companies and local private players to invest in the country’s hydrocarbons industry.The two auctions will take place in the first and second half of the year, respectively, said Aldo Flores, deputy Energy Minister for oil and gas, adding that the first one will target onshore and shallow water deposits, while the second tender will target deepwater and shale reserves.The tenders are part of a comprehensive energy…


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Peak Animal Spirits

The gap between people’s perceptions of reality (as judged by consumer and business surveys of confidence) and reality (as judged by fundamental economic data) has never been higher than it is today.

Peak ‘Animal Spirits’

 

The problem for those waiting for ‘hard’ data to catch up to ‘soft’ data is – it never has.

 

And in this case – the ‘soft’ survey data has moved 2 standard deviations above the norm…

The problem – for the hope enthusiasts – is the last 5 times that the gap between perceived economic reality and actual economic reality was near this high, the S&P 500 had a troblesome few weeks/months after:

  • JUL 2007 -12%
  • JUN 2009 -9%
  • APR 2010 -17%
  • MAR 2011 -19%
  • NOV 2014 -6%

Still, this time will probably be different.

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Goldman Sachs & Morgan Stanley Pull Off the Heist of the Decade, Bends Over Those Who Don’t Read BoomBustBlog

President Obama implemented the Fiduciary Rule, which was supposed to go in effect next month. In short, it says financial advisors and salesmen had to put the best interests of thir clients ahead of thier own interests. In other words, it outlawed blatantly ripping off our clients. Trump came in and halted this, basically ensuring that it will still be legal to put your bonus pool’s interest ahead of you client’s interest. Cue in Goldman Sachs and Morgan Stanley. They have pulled off the heist of the decade, essentially selling 200 million digital tokens (they’re calling them stocks) with no voting rights at a trailing P/S multiple of 60x and forward multiple of 20x for a startup losing half a billion per year, with said losses increasing over $200M Y-o-Y. This is almost the ultimate in reward free risk

you basically take the risk of a venture capital investor, get the protective covenants of… Oh yeah, there are none, and the reward of… who knows, it’s a startup! Oh yeah, you get the returns of venture capitalists as well, right? Wrong! You don’t have control or voting powers in the company at all.

At 200 million shares, Snap raised $3.4 billion and was valued at nearly $24 billion as of its pricing. CNBC reported investors were expecting a pricing of $17 to $18 per share, above the $14 to $16 per share range originally given by the company. 

The IPO is 12 times oversubscribed. Let me repeat this, 12x oversubscribed. That’s how bad… Im sorry, good, Wall Street is at convincing people to want to through their money into the vast unknown. 12 buyers for every share for sale!. ed. Some managers told CNBC they got as little as 2 percent of what they were asking for.

Goldman has done this before (but they’ve outdone themselves with this Snap thingy), reference Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing. I was absolutely right then, and math (or common damn sense) dictates I’m right now. The difference is… Facebook was making money, at the fop of its sector and growing like a weed, but still half the valuation of Snap! To be precise, FB generated 7x the revenue of Snap at its IPO and was easily profitable, and had no close competitors – and was still drastically overpriced at IPO. Snap is literally for suckers and sheep. Good luck, fellas! You’re gonna need it, particularly as we’re at the top of the business cycle (as compared to being at the bottom at Facebook’s overpriced IPO.

The macro cycle is not the only thing that should concern those who fell for this deal. Snapchat’s growth is slowing already!

                                                                 
     Global     North America (2)     Europe (3)     Rest of World  
Last Month
of Quarter(1)
   DAUs 
(in millions)
     YOY
Growth
    DAUs 
(in millions)
     YOY
Growth
    DAUs 
(in millions)
     YOY
Growth
    DAUs 
(in millions)
     YOY
Growth
 
Mar’14      50         415     27         259     16         1,065     7         856
June’14      59         173        31         116        19         265        10         319   
Sept’14      65         126        32         82        21         176        12         258   
Dec’14      74         92        36         56        24         118        15         214   
Mar’15      81         62        38         38        27         73        16         134   
June’15      89         51        41         33        29         52        20         103   
Sept’15      99         53        46         42        31         51        22         90   
Dec’15      110         48        50         39        35         45        26         77   
Mar’16      130         60        57         50        42         53        32         95   
June’16      148         66        63         55        48         65        37         92   
Sept’16      154         55        66         43        50         59        38         74   
Dec’16      161         46        69         39        53         51        39         53   

 

As reported by CNBC, this is the CEOs explanation for said slowdown:

“I think broadly speaking if you look at rest of world growth as a proxy for Android, you can start getting an understanding for the performance issues we face on Android in the last two quarters … [Snapchat] Memories worked very very poorly on low-end devices, largely because of the way we were caching images. The best way to get an actual feel for that is to buy a $100 Android on Amazon and play with the app. That will give you a more qualitative understanding of the issues we face on lower end devices. We’ve been investing a lot in fixing that and we actually changed the way we develop our products. So in the past our design teams used only iPhones … Now we transitioned half the design team to Android.””

Ok, but that doesn’t really justify the slowdown. As a matter of fact, there are plenty of holes in that story. Here’s a couple: 

  1. The ROW growth took a big hit, yes, but so did Europe and North America – where iPhone use is rampant.
  2. Not only is the iPhone insanely popular in Europe and N. America, but assuming the Android usage is the problem as the CEO suggests, it’s definitely not performance related. The highest selling android phone in N. America is the Samsung Galaxy S and Note series. Both of these run complete circles around the iPhone in photography, storage and screen resolution – complete circles. If anything, strong high end Android adoption should be a boon to user growth on a photographic platform, not a bane. As a matter of fact, due to Samsung’s debacle with the Note 7, Apple even gained share last quarter….

Wait, it gets deeper. Later on the CNBC story, others have corroborated what I see as a bogus excuse, to wit:

When contacted for this story, Mark Cuban elaborated on Spiegel’s answer in a direct message: “Makes perfect sense. It’s an image driven app that can overwhelm lower end devices. But that’s fixable.”

Another hedge fund investor, who attended the event and requested anonymity due to private nature of the meeting, agreed.

“It’s a fair excuse because low end Android development is known and well covered problem given fragmentation and given those devices are less engineered for high quality video,” the person said.

Moral to the story, be wary of Mark Cuban and anonymous hedge fund investors backing of “alternative facts” explanations of slowing growth at the top of the business cycle when non-voting shares are sold at what has to be a world record valuation for a start-up company that loses half billion dollars per year, with said losses increasing by roughly $200M per year.

If semi-annual or annual subscribers desire a valuation of SNAP to determine where to go long or short, let me know via tthe BoomBustBlog contact form. Click here to subscribe – we give discounts if you spread the word through social media.

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Beware The Bakken

Via Arthur Berman of OilPrice.com,

It’s the beginning of the end for the Bakken Shale play.
The decline in Bakken oil production that started in January 2015 is probably not reversible. New well performance has deteriorated, gas-oil ratios have …

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<b>Crude Oil</b> Tumbles To Lowest Since February 8

Crude oil prices continued to fall Thursday, stung by a stronger dollar and … April WTI oil settled at $52.61/bbl, down $1.22, or 2.3%, its lowest since …The post <b>Crude Oil</b> Tumbles To Lowest Since February 8 appeared first o…


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Fillon’s Home Raided By Corruption Investigators; Campaign On Verge Of Collapse

One day after French presidential candidate Francois Fillon revealed that a judges are to place him a under formal criminal investigation later this month over allegations that he illegally employed his British wife and children at taxpayers’ expense, detectives raided his home in the capital’s elegant 7th arrondissement. At the same time, former French PM Alain Juppe was reportedly poised to replace Fillon as a result of the sprawling investigation.  As the Telegraph reports, sources close to Mr Juppé, who had previously ruled out being a “plan B”, told Libération newspaper he had reconsidered because of the deepening crisis in the Républicains party provoked by Mr Fillon’s refusal to stand aside despite haemorrhaging support.

Even without today’s raid, it appeared almost certain that Fillon’s presidential bid was close to collapse after more than 20 centre-Right MPs and councillors publicly withdrew support for him and key members of his campaign team quit. About 20 mayors also urged him to stand aside in favour of another candidate better placed to regain the Elysée Palace. Allies of Mr Juppé, who came second to Mr Fillon in the Republicain primaries, said he was “ready but loyal” and would only step in if asked to do so by the beleaguered candidate.

After an opinion poll indicated that three-quarters of voters would prefer Mr Fillon to withdraw, key figures in his party voiced fears that he will be knocked out in the first round of voting at the end of next month.

Still defiant, Mr Fillon responded that his “support base is holding” as he addressed a rally of 3,000 supporters in the southern city of Nimes last night. “You see before you a fighter,” he declared. “I will never give up.”

Juppé had previously been blocked from seeking to take over by supporters of Nicolas Sarkozy, the former president. Yesterday Mr Sarkozy appeared to lift his objections. His ally, the MP Georges Fenech, said he was now supporting Mr Juppé because he could not accept “his political family being taken hostage”.

As the Telegraph adds, the Républicains party has been thrown into chaos after Mr Fillon vowed to fight on until the election in less than two months. In a defiant speech on Wednesday, he attacked the justice system for seeking his “political assassination”. Some of Mr Fillon’s supporters were alarmed by his plan to hold a rally in Paris on Sunday which he said would be a protest against “the coup d’état by the judges”.

Meanwhile, president Hollande warned him not to turn his meetings into demonstrations against the judiciary. Franck Riester, an MP who had backed Mr Fillon, said: “We have to say stop. Enough is enough.” The Republicains’ woes further boosted Mr Macron, now the front-runner, who is standing as the candidate of an Obama-inspired “change and hope”.

His comeptitor, Marine Le Pen, has also been facing legal prosecution: as reported earlier, in a separate case involving inflammatory tweets, the European parliament where she is an MEP, voted to lift her parliamentary immunity. This will allow French prosecutors to bring charges against the National Front leader for tweeting graphic images of Isil atrocities.  The case, which is not expected to be resolved for several months, is unlikely to affect her presidential ambitions.

For Fillon, however, it may be too late.

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