Wells Fargo’s ‘Criticized Loans’ Surge 62% in the Quarter, Menaced by Exposure to Energy

The Warren Buffett favorite is the petrol-bank of America, with total exposure to the oil and gas industry of $43.5 billion, more than double that of JP Morgan’s loan portfolio. Moreover, their ‘criticized’ loans, which are defined as being abhorrently abysmal to essentially worthless, skyrocketed to $30 billion–up from $18.5 bill.

The balance of Wells Fargo’s $290 billion loan portfolio was rated ‘pass’…for now.

Over the past few weeks, banks have redetermined the credit lines of hundreds, if not thousands, of energy companies. It’s worth noting that many of these credit lines, extended by the likes of WFC and JPM haven’t been tapped yet. The predominant part of maturities in the oil and gas space occurs after 2016, which means, essentially, the industry is rolling the dice–hoping for a better spot market to sell into.

As I’ve noted here on numerous occasions, the vast, overwhelming, majority of energy companies are producing crude oil at record rates, which is contributing to the seemingly endless glut of crude oil already in storage. It doesn’t take a rocket scientist to figure out that an industry in desperation, doing desperate things, isn’t exactly what the industry needs to balance out the supply/demand situation that was the cause of the price drop in the first place.

I am short XLE, but have been unwinding said position over the past week.

The new bond King, Boss man at Double Line, Jeff Gundlach, said negative rates are deflation. It is the very essence of deflation, a tax levied upon the people that will have an onerous effect on asset prices. Moreover, he believes mortgage REITs are a screaming buy, whereas utilities are frothy.

He believes Trump will win and people need to deal with that eventuality, whether they like it or not. He said Trump is very much like Reagan and is supremely comfortable with debt. He believes Trump will try to build the wall and enact policies that will be beneficial to infrastructure spending.

All in all, a solid interview.

David Einhorn announced during his Sohn presentation that Caterpillar isn’t being priced for trough earnings. That much is utter horseshit, at 22x. The company is exposed to a deleterious mining environment that is bound to take its toll on the world’s largest miner. Moreover, he believes the stock will bottom in 2018, following a cataclysmic share price drop of course.

On the long side, he likes GM because it’s trading 6x earnings and because Chinese people need to drive to and fro their ghost cities. He says GM is ‘financially healthy and growing.’

CAT is lower by 1.2% in the after-hours, a mortal sin upon the House of the Dow Jones Industrial Average.

GM is higher by 1.8%.

Here we go again. Production came in at the high end of guidance. Moreover, the company has upped production guidance to flat from -5%.

Indeed.

• Reports Q1 (Mar) loss of $0.05 per share, excluding non-recurring items, $0.05 worse than the Capital IQ Consensus of ($0.00); revenues fell 31.4% year/year to $283.6 mln vs the $273.92 mln Capital IQ Consensus
  • Delivered quarterly production of 12.7 million Boe, or 139.5 MBoepd, exceeding the high end of the co’s guidance.
  • Production for the first quarter of 2016 was 12.7 million barrels of oil equivalent (MMBoe), or an average of 139.5 thousand Boe per day (MBoepd), an increase of 6% from the first quarter of 2015 and above the high end of the co’s guidance
  • First-quarter 2016 production was comprised of 64% oil and 36% natural gas.
  • During the first quarter of 2016, Concho averaged 10 rigs, compared to 12 rigs in the fourth quarter of 2015. Concho started drilling or participating in a total of 40 gross wells (31 operated) and completed 50 gross wells during the first quarter of 2016.

Outlook:

• Co raises 2016 production growth guidance to 0%, up from -5% to 0%

Revenues plummeted by 27%, but production was up 12% over last year. Let that sink in.

I keep highlighting the notes emanating from these oil producers to unveil the lie that is being purported by them and the media. The current thesis to be long oil is that production is being wildly cut, across the board, because of the 60% drop in crude. This is a bald faced lie. Nothing could be further from the truth.

Over the past year, small players have washed away. But these guys, the CLR’s, CVX’s and XOM’s of the world are drilling and producing more than ever.

Via Briefing.com

• Reports Q1 (Mar) loss of $0.41 per share, $0.04 worse than the Capital IQ Consensus of ($0.37); revenues fell 27.6% year/year to $453.17 mln vs the $442.74 mln Capital IQ Consensus.
• First quarter 2016 net production totaled 21.0 million barrels of oil equivalent (Boe), or 230,800 Boe per day, up 3% from fourth quarter 2015 and 12% higher than first quarter 2015. Total net production for first quarter 2016 included 146,500 barrels of oil (Bo) per day (63% of production) and 506.0 million cubic feet (MMcf) of natural gas per day (37% of production).
• Based on strong first quarter production, the Company today increased its production guidance for 2016. The Company expects to exit the year between 190,000 and 200,000 Boe per day, which is an increase of 10,000 Boe per day. Likewise, 2016 average production is now expected to be between 205,000 and 215,000 Boe per day.
• Continental also announced it closed the sale in late April of approximately 132,000 net acres of leasehold in the Washakie Basin in Wyoming for $110 million. The leasehold was non-core, non-producing, undeveloped acreage in Sweetwater and Carbon counties and included no proved reserves. After this transaction, the Company retained non-operated production and approximately 40,000 net acres in the basin.

Nick Danaher of Domando Capital Management said during his presentation today that TRIP was ‘an easy double’ and ‘possible multi-bagger.’ Almost immediately thereafter, the stock cascaded lower in what could only be described as a ‘non-game changing’ quarter.

Investors are tripping over themselves, trying to blow out of TRIP in the after-hours.

After the market close, the Needham, MA-based online travel company posted adjusted earnings of 32 cents per diluted share, which fell short of analysts’ expectations of 46 cents per share.

Revenue declined by 3% to $352 million year-over-year and was below Wall Street’s forecasts of $370.5 million.

Chanos is out talking trash today at the Sohn Conference. He’s not mincing words and paints a picture of Elon Musk as a two-bit huckster and snake oil salesman. His rhetoric is strong, pimp hand even stronger. His track record for Sohn conference short picks is unparalleled.

BID -31%
STX -47%
WDC -28%
PBR -66%
VALE -72%

With a track record like that, I think it’s fair to say Jim is worth listening to when he describes his next short.

He thinks SCTY runs into financing problems in this calendar year and describes TSLA as being something made up in a fictional world, unsustainable and bound to break into 10,000 pieces.

NOTE: Both TSLA and SCTY are owned by E. Musk.

Legendary investor, Stanley Drunckenmiller said the Fed is obsessed with preventing a 20% drop in the markets and have based policy around that core thesis. He thinks it’s absurd.

Moreover, he suggests that you and I should get out of the market, saying the bull market has exhausted itself and that gold is the preferred investment for the times we live in.

Lastly, he said the Federal Reserve is the ‘least data dependent Fed in history’. They have no end game and the apocalypse is near.

Post-script: he notes that China is going to blow up, citing their current form of economic policy and ‘zombie lending’ to a ‘supreme mania’, denoting its similarities to America, circa mid 2000s.

Yes, indeed. The financial aristocracy has gathered to fraternize amongst each other, offering sageness and stock picks, all for the explicit benefit for kids with cancer. While talking their books with pointed malice to ‘inadvertently’ profit from their well rehearsed presentations, it would behoove me to not report on these ongoings, especially when stock market royalty announced their latest short position.

Come hither small dirty man reading the internets from this portal station, corner of the world.

Carson Block, The Earl at Muddy Waters, would like to announce his latest short sale.

Upon mentioning his ‘thesis’ behind the short sale, the stock plummeted by as much as 14%. It has, since then, rebounded with vigor, now off by a mere 4%, greatly distressing and upsetting the good earl, who had wild eyed hopes and expectations of wanton cataclysm to befall the Little Rock, AK bank.

Gold is trading down today, after soaring for the better part of 2016. I guess it’s due to the rise in the dollar, which is higher by 0.25%. Nevertheless, precious metals are down by a trifling today, just about 1%.

What is the response by the even handed folks trading in and out of gold stocks?

Complete and utter chaos.

As a whole, gold stocks are off by more than 5%, as investors run around with their heads on fire in search of a bucket of water. For the year, these stocks have gone up triple digits, even though the yellow metal is up much less than that, higher by 20%.

I suppose there’s a multiplier effect of 5 in this idiotic sector. For every 1% move in the underlying commodity, there is a 5% move in the stocks. Makes sense.