Crude down 4.7% isn’t an ordinary day at the office. More than that, it ruins a sector beguiled and hamstrung by a debt load it can no longer service. In order for James Cramer and his band of roving idiots to get erect over the prospects for crude oil stocks again, the commodity needs to sustain $60, a level it has not reached–thus far.
Bear in mind, there is a wall of debt coming due in 2017. Now that we’re in the 2nd half of 2016, investors will begin to price in the horseshit.
Let me explain.
According to Exodus, the amount of distressed debt in the basic resource space is $136 billion. These numbers are based upon companies having access to capital, gauged by their debt/equity ratios. In other words, the higher their stock prices go, the more access to capital they possess. Naturally, the opposite applies to when these stocks are getting hammered lower.
For example, the amount of debt for companies just below distressed, from 2-4.99x debt/eq is a staggering $446 billion. With crude stocks down 6% for the day, you can see how this can snowball quickly, into a problem that will ruin many days and nights for many bankers.
While BREXIT was an important tipping point for the scales of freedom v tyranny, the crux of the issues for this market has always been in the oil and gas space. Aside from the negative rate issue, this is my primary concern for 2017 and beyond.If you enjoy the content at iBankCoin, please follow us on Twitter