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Comments »Monthly Archives: June 2012
Holy Shit; MSNBC Has No Idea How Futures Work
Watch the video. Ignore for a minute that it’s horseshit and Delta is just booking tax offsetting losses (I know, I know. This isn’t a loss at all. They’re just cherrypicking a gross data point in a net world…). Or that Delta can now try and lock in lower prices along the entire length of the futures curve, more than compensating the “loss”.
At around 50 to 55 seconds in, Kate Kelly tries to argue that “analysts” thought losses related to hedging would be worse for Delta.
Pardon me, but a move from $100 a barrel – which had been there for 6 months – back to a price of around the $70s, or roughly where it was last September, would have destroyed ALL hedges. At least, any that weren’t on the books from before 2010 when oil could still be purchased for $40 a barrel.
What “open” positions is she talking about?
Comments »Delta Air Lines, which Tuesday morning announced that busted fuel hedges had resulted in a $155 million second-quarter loss, became the first in what could be a series of major carriers to take pain from an unexpected plunge in crude prices.
WTI crude futures have fallen more than 27 percent since their February high, taking the market by surprise and rendering airline hedges – originally intended to ease the economic pain of higher fuel prices – largely ineffective.
At Delta (DAL), the gyrations in crude not only created a loss related to fuel hedges that settled during the June quarter, which ends Saturday, but also contributed to what the company estimates will be an $800 million charge for its open hedging positions, which run through 2013.
United Continental Holdings (UAL), the nation’s largest carrier by available seat mile, is in a parallel position – though probably with smaller absolute losses, according to information from filings and people familiar with the matter. The airline has hedged between 31 and 36 percent of its expected consumption through options and collars on diesel, jet fuel, and other energy markets, according to securities filings, and was originally positioning for higher crude prices.
In keeping with its usual practice, United will issue second-quarter investor guidance in the coming days to reflect how sales and costs have impacted its performance over the past three months. That release, which could come as early as Wednesday, is likely to include new estimates for United’s overall seating capacity, how expensive jet fuel has been, and how revenue has held up, say the people familiar with the matter – all of which will impact overall results.
Sociopath, Sean Egan, Downgrades Germany
I predicted this three weeks ago.
6/26/2012: Federal Republic Of Germany: EJR lowered AA- to A+ (Neg.) (S&P: AAA) (3413Z GR)
Synopsis: German chancellor Angela Merkel continues to create tension with EU member states by resisting calls for EU bonds (shared liabs.), money printing calls and for her pushing for fiscal controls and the seniority of bailout funding. Germay is likely to be outvoted by other ECB members and therefore will have greater prospective exposure. Watch for the EFSF and the ESM morphing into banks (thereby depressing eventual recoveries) and a rise in the number of euros. The fallout from a likely Greek exit needs to be monitored. We are cutting to ” A+ “
Falcone’s LightSquared Files For Bankruptcy
You must give Phil this; that was a courageous move. I wish it had worked for him.
Naturally, the US government will have adopted his company’s technology for itself inside of 10 years…
(Reuters) – Hedge fund manager Philip Falcone’s dream of bringing another wireless network to the United States likely came to an end on Monday, when LightSquared Inc, the ailing telecommunications company he bankrolled, filed for bankruptcy protection.
LightSquared and many affiliates, as widely expected, filed for protection from creditors with the U.S. bankruptcy court in Manhattan. Falcone, once one of the hedge fund industry’s most powerful figures, and LightSquared’s creditors failed to reach an agreement.
Still Falcone, who dramatically overhauled his portfolio in the last two years by putting nearly all assets into LightSquared, is not giving up on his dream of building a network to compete with AT&T, Verizon and others. He put a positive spin on the bankruptcy filing by saying it would give the company much needed breathing room and protect it from creditors who he said are looking for a quick profit.
The future of LightSquared, 96 percent-owned by Falcone’s Harbinger Capital Partners, has been in doubt since February when the U.S. government effectively told the company to stop building its network.
Falcone’s dream rested largely on the U.S. government’s permission for LightSquared to build out the wireless network. When tests showed that LightSquared’s network would interfere with global positioning systems used by the military and various industries, the U.S. Federal Communications Commission said it would revoke permission to build out a new high-speed wireless network.
Read more here:
Comments »Market Update
Today’s Heat Map and A/D Lines
Italy’s Unelected PM Mario Monti: “Eurobonds, Or I Resign”
“Update: According to subsequent press reports, Monty has denied he threatened to resign. i.e., Monti just blinked. So now it is up to Merkel who will either have a very short life, or Monti will have to come up with a different professional suicide gambit.
Just when we thought the European drama couldn’t get any more poignant following Merkel’s statement earlier which boils down to “No eurobonds or death”, here comes Italy’s unelected PM and former Goldmanite, Mario Monti, threatening that the beggar will pull the trigger on his own political career if he is not allowed to be a chooser. From Il Giornale: “If the Chancellor does not give up I will tell you that I resign because if things do not change are not able to bring Italy out of the abyss”
Comments »BBG: GERMANY SOURCE: EU DISCUSSING TAKING SENIORITY AWAY FROM ESM
The State Of Everything That’s Important In The World
$MS just put out a massive presentation analyzing the bull and bear arguments for many asset classes.
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MERKEL: Europe Will Never Share All Of Our Debts For ‘As Long As I Live’
CDS Costs Soar for Spain; Downgrade to Junk Status Close
Research: Gulf Shrimp Widely Contaminated With Carcinogens
McDonald’s French Fries Now Considered a Dangerous Weapon
Stockton, Calif. to Take Up Bankruptcy Budget Plan
“(Reuters) – Stockton, California was poised on Tuesday to take a major step toward becoming the largest U.S. city ever to file for bankruptcy after talks with its creditors on Monday at midnight.”
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Cyprus Bailout May Be Up To Over Half The Size Of Its Economy
Eagle Shipping Offers Dilution to Shareholders – $EGLE
“Dry bulk shipper Eagle Bulk Shipping Inc. (NASDAQ: EGLE) filed a Form S-3 with the SEC this morning announcing the sale of up to 3.15 million shares of common stock priced at $2.84. Shares closed at $3.14 last night, working out to a discount of nearly 10% for today’s offering.”
Comments »June Retail Sales Predicted Soft – $COST, $LTD, $SKS, $BKE, $JWN, $KSS, $KORS, $LULU, $ZUMZ, $FRAN, $ANF, $DSW, $BBBY, $BODY
“Retail sales for the month of June are expected to show only modest growth according to research firm Retail Metrics Inc. June is not a particularly good month for most retailers, and this year stores have to compare sales to June 2011 when the sales growth over June 2010 averaged a phenomenal 7.2%.”
Comments »DB: Consumer De-leveraging to End in Two Years
“Deutsche Bank’s latest research on US consumer leverage suggests that the deleveraging process may have another couple of years to run. They determined the long-term trend line based on consumer debt to GDP ratio from 1953 to 2003, thus excluding the bubble years. Then they compared the current leverage to this line and looked at the rate of convergence. The intersection with the trend line is expected to take place in a year.”
Comments »Misunderstanding Banking is Helping Bankrupt an Entire Society
“Much has been written since the JP Morgan trading fiasco and the big Congressional hearing last week – some of it enlightening, but most of it confusing some of the basic elements about banking and money in general. I was reading this piece yesterday on Bloomberg about the responsibilities and the “job” of banks. It got me thinking about how badly people confuse the role of banks in our system. So I thought I’d chime in.”
Comments »German Bonds Begin to Lose Their Luster
“For months German government bonds, known as bunds, acted as a safe haven for investors, just like their U.S. brethren – Treasurys. But now bunds are starting to sag.
Ten-year bund yields have surged to 1.46 percent from a record low of 1.12 percent June 1. The 10-year Treasury yield hit an all-time low that same day – 1.44 percent. But it has risen more mildly, to 1.61 percent.
Bunds are suffering for several reasons, The Wall Street Journal reports. First, some investors worry that Germany’s financial health will be damaged by all the aid it must dole out to weaker European economies buffeted by the debt crisis.”
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