David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Homeowners are sitting on a record amount of cash, but they're not really tapping it

    This article by Dina Olick for CNBC may be of interest to subscribers. Here is a section:

    So-called tappable equity grew by more than $335 billion during the quarter. The total is 26% more than the mid-2006 peak of $5 trillion. Roughly 45 million mortgage holders have excess equity, and half of them have mortgage rates higher than 4.25%, making a refinance not only possible but attractive. The average rate on the 30-year fixed is now around 3.6%. The majority of these borrowers also have top credit scores.

    Falling mortgage rates over the past several months have caused a surge in overall refinance activity, but despite the record housing wealth, homeowners have been highly conservative about taking cash out. In 2006, 89% of refinances were cash-out, according to Freddie Mac. In 2012, when home prices crashed, that share dropped to 12%. But even now, with prices back above their previous peak and mortgage rates much lower, cash-out refinances are just 61% of the total pool of refinances.

    “I think you’re seeing a little bit of reluctance both on the side of lenders and on the side of borrowers,” said Andy Walden, director of market research at Black Knight. “If you look at lending, guidelines are a little bit tighter than they were back in 2006, but even given those lending restrictions, I think you’re seeing more conservative behavior on behalf of homeowners as well, as folks have the remembrance of the financial crisis in the rearview mirror.”

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    OPEC+ Expects to Drain Oil Stocks as It Makes Supersized Cut

    This article by Grant Smith for Bloomberg may be of interest to subscribers. Here is a section:

    In response, the Saudis have reduced output by far more than pledged under the terms of the deal, and the coalition’s overall implementation rate last month was 59% above target, according to a statement posted on its website on Tuesday. That means the alliance cut supplies by about 1.9 million barrels a day.

    OPEC signaled that the deeper-than-anticipated cutbacks had been necessary because of the extreme upheaval in the global economy.

    “This high level of overall conformity has offset uncertainty in the market due to ongoing economic-growth worries,” according to the statement from the Joint Ministerial Monitoring Committee, a body set up by OPEC and its allies to oversee implementation of their strategy.

    “Along with healthy oil demand,” the supply restraints have “arrested global oil-inventories growth and should lead to significant draws in the second half of the year,” the committee said.

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    Powell Says Economy in Favorable Place, Faces Significant Risks

    This article by Craig Torres and Rich Miller for Bloomberg may be of interest to subscribers. Here is a section:

    “Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Powell said in the text of his remarks Friday to central bankers gathered at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. “We will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.”

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    Musings From the Oil Patch August 13th 2019

    Thanks to a subscriber for this edition of Allen Brooks’ ever-interesting report for PPHB. Here is a section:

    Today’s energy world is nothing like what it was prior to OPEC’s move.  It is even moving away from the model that evolved immediately after the price collapse.  Both of those models have been shunned by investors.  A new model is evolving in response to investor demands that energy companies be profitable and return cash to investors.  This new model is evolving in response to the disconnect between energy company fundamentals and their share prices.  That disconnect is evident in Exhibit 8, which tracks oil prices and stock indexes reflecting oil and oil service companies since mid-2014 when oil prices began sliding, before OPEC delivered its coup de grâce.  Oil company stocks (XLE) performed better during this period, largely because they pay dividends, offering investors income while waiting for share values to reflect higher oil prices.  Oil service stocks (OSX) fell steadily in this period, because of too much debt and shrinking market activity leading to substantial asset impairment and eroding company values.  

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    Mysterious radiation leak, 100x larger than Fukushima disaster, traced to Russian facility

    This article from the Bigthink.com may be of interest to subscribers. Here is a section:

    "Today most of these European networks are connected to each other via the informal 'Ring of Five' (Ro5) platform for the purpose of rapid exchange of expert information on a laboratory level about airborne radionuclides detected at trace levels," it says. "In October 2017, an unprecedented release of ruthenium-106 into the atmosphere was the subject of numerous detections and exchanges within the Ro5."

    State-owned Russian nuclear corporation Rosatom denied the findings of the recent study.

    "We maintain that there have been no reportable events at any Rosatom-operated plants or facilities," Rosatom said. "Both the national regulator and experts from an independent international inquiry inspected the Mayak facility back in 2017 and found nothing to suggest that the ruthenium-106 isotope originated from this site, nor found any traces of an alleged accident, nor found any evidence of local staff exposure to elevated levels of radioactivity."

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    Bridgewater's Ray Dalio Discusses the Impact of China's Growth on the World Economy

    This is a fascinating interview where Ray Dalio discusses the merits of betting on China.

    As Shale Drillers Stumble, Big Oil Says It Can Do Permian Better

    This article by Rachel Adams-Heard for Bloomberg may be of interest to subscribers. Here is a section:

    Concho Resources Inc., long considered one of the Permian’s premier operators, was forced to scale back activity after drilling almost two dozen wells too closely together. That move by the Midland, Texas-based producer spooked investors across the industry, with Evercore ISI predicting the “carnage” would have a lasting impact.

    Concho’s problem with well spacing highlights the challenges of fracking so-called child wells: Too close to the “parent,” and output is less prolific; too far apart, and companies risk leaving oil in the ground.

    Exxon and Chevron say they aren’t as exposed to those problems. Because of their size relative to smaller independent producers, the oil giants are able to lock up acreage, giving them room to be more conservative in their well spacing.

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    Tesla's big battery in South Australia is a "complete waste of resources," claims Nissan

    This article by Simon Alvarez for Teslarati.com may be of interest to subscribers. Here is a section:

    Thomas’ statement comes as he was discussing the new Leaf’s vehicle-to-grid/vehicle-to-home (V2G/V2H) system, which will allow the all-electric car to serve as a home battery unit. With the system in place, the Leaf will not only store energy by plugging into a home or business; the vehicle could also serve the energy back when needed. V2H is already in use in countries such as Japan, and a release in Australia is expected within six months. 

    The Nissan executive noted that the Leaf’s V2G system has the potential to help homeowners save money, especially if the vehicle charges through a rooftop solar system during the day, and uses its stored energy to power appliances and lights at night. 

    “The way we distribute and consume energy is fundamentally inefficient … what we need is flexibility in the system. It’s great that we’ve invested all this money in renewable energy, but fundamentally we’re wasting most of that energy because it’s all being generated in the middle of the day when we don’t really need it,” he said. 

    Tim Washington, CEO of charging solutions provider Jetcharge, noted that Nissan V2H technology has a lot of potential, considering that vehicles spend much of their time just parked, or in the case of electric cars, plugged in. 

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