The Real Deal Blog

Mexico’s Oil Production Continues to Collapse

In May, oil production from Mexico’s (previously) largest oil field Cantarell slipped below 700 kb/day. While the death of Cantarell has been much discussed since it peaked five years ago at 2.1 Mb/day, what’s less recognized is that the toppling of Cantarell has absolutely shattered Mexico’s effort to halt the decline of oil exports.

The problem is simple. With Mexican domestic consumption of oil rising or flat, and overall production in serious decline, exports have fallen even more dramatically. And given that Mexico will one day not be able to export oil at all, one wonders they should take…

26Jun2009 | The Real Deal | 0 comments | Continued

California Bankruptcy Odds 1 in 4 Within Five Years

Forbes:

What are the odds that California defaults on its debt payments? Using the market for credit insurance as a guide, one in four within five years. Those are amazing odds, signalling that those who buy insurance on debt think that the federal government will allow California to fail where it thought that AIG and Citigroup simply had to be rescued.

In the past month, rating agencies have warned that California’s $24 billion budget shortfall for the fiscal year beginning in July threatens its credit ratings — its mark of A already makes it the lowest-rated state in the U.S. on Standard & Poor’s…

25Jun2009 | The Real Deal | 0 comments | Continued

BRIC Countries Meet to Discuss the U.S.

FT:

Challenging the American empire will be the focus of meetings in Yekaterinburg, Russia, today and tomorrow for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other leaders of the six-nation Shanghai Co-operation Organisation. The alliance comprises Russia, China, Kazakhstan, Tajiki-stan, Kyrgyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia.

The attendees (who will be joined on Tuesday by Brazil for trade discussions) have assured American diplomats that dismantling the US financial and military hegemony is not their aim. They simply want to discuss mutual aid - but in a way that has no role for the US…

18Jun2009 | The Real Deal | 0 comments | Continued

Exactly the Point on Oil

Forbes:

If crude oil can double in value with the world in recession, just imagine what will happen when demand picks up. Prepare yourself.

(snip)

Don’t believe the barrage of short-term noisemakers. Some experts believe supply is running far ahead of demand–but this is an extremely short-sighted view that fluctuates fast and seems to be ending as oil and gasoline inventories begin to get tighter. Understand that the oil producers don’t want prices to soften.

(snip)

We asked our own version of "Deep Throat," a gentleman who has devoted his career to making a fortune in the energy markets, and we want you to know…

12Jun2009 | The Real Deal | 1 comment | Continued

Jim Rogers says Dow could go to 1,000,000

But not the way you think:

While he’s negative on US assets — he says he’s gotten rid of all of his dollars, for the most part — he advises against shorting this market.

It’s a bear market rally. I was going to say I don’t think S&P 500 will see new highs. But I have to quickly temper that by saying against the dollar because the S&P 500 could triple from here if they print enough money and the value of the US dollar collapses, then S&P could go to 50,000, Dow Jones can go to 1,000,000. Which is one reason why I…

4Jun2009 | The Real Deal | 2 comments | Continued

12% of Mortgage Holders Behind on Payments

AP:

A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn’t expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were in the foreclosure process.

At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were…

29May2009 | The Real Deal | 0 comments | Continued

Poor Harvests May Lead to Grain Price Spike

Andrew Mickey over on Seeking Alpha has a good article about the poor soybean harvest in Argentina among other factors will lead to a spike in grain prices later in the summer:

(snip)

This summer has the potential to be a very big one for agriculture commodities. The price of everything – wheat, corn, barley, sunflower, etc. – are on the verge of going much, much higher.

(snip)

Just like every other commodity, agriculture commodity prices are driven by supply and demand. The catalysts for agriculture commodities in this summer rest on the supply side.
The first factor is grain stockpiles. They’re at record lows.…

27May2009 | The Real Deal | 0 comments | Continued

Dollar and Treasuries Are Toast

Bloomberg:

The odds on the dollar, Treasury bonds and the U.S. government’s AAA grade all heading for the dumpster are shortening.

While currency forecasting is a mug’s game and bond yields can’t quite decide whether to dive toward deflation or surge in anticipation of inflation, every time I think about that credit rating, I hear what Agent Smith in the “Matrix” movies called “the sound of inevitability.”

Several policy missteps suggest that investors should stop trusting — and lending to — the U.S. government. These include the state’s pressure on Bank of America Corp. to buy Merrill Lynch & Co.; the…

22May2009 | The Real Deal | 2 comments | Continued

The Next Trillion Dollar Tsunami of Bad Debt

NY Post
John Crudele

(snip)

Phillip F. Blumberg, chairman of Blumberg Capital Partners, thinks banks are really worried about the commercial real estate loans they issued during the orgasmic 2000s. That’s the reason, says Blumberg, banks are remaining conservative in their lending.

Credit cards may be bad but commercial real estate is worse.

"It’s absolutely frightening," says Blumberg, who adds that he sold most of his real estate holders before the bust.

And the most dangerous time for banks will be 2010 to 2013 when $1 trillion in commercial real estate loans will mature and — like homeowners before them — owners of commercial…

21May2009 | The Real Deal | 2 comments | Continued