Week-in-ReviewPoon Panichpibool

The Petro Bomb and 28 Debts Later

• Slump in Oil price = Real pains for Banks too! How?

•What is going on with the Banks? (Too much bad debts?)

•Will we have another financial crisis?

• The End of Debt Cycle?

The Petro Bomb

• Low oil price turned energy loans into bad loans.• ⅓ of Oil producers (~175 companies) are at high risk of

bankruptcy - rising risk that bank loans will not be repaid. (Source: Deloitte)

• Banks have to boost reserve for impaired energy loans.

• Affect their bottom lines!

The Petro Bomb - JPM Case• If oil were to hold near $25 a barrel for 18 months, it would

need to boost reserves for impaired energy loans by $1.5 billion. (Is it possible for prolong historically low oil price?)

The Petro Bomb - $123B Banks’ Energy Loans

The Petro Bomb - Lots of Junks!

The Petro Bomb - A nightmare from Fed St. Louis

The Petro Bomb - A nightmare from Fed St. Louis

•Oil prices will reach $0 per

barrel by mid 2019.

•Good news … It’s largely unrealistic.

The Petro Bomb - What’s next?

The Petro Bomb - What’s next? The Rise of EVs

28 Debts Later - Many Banks reported bad Q•Banks reported significant drops in profits, some even

reported losses.

• Result of loan losses provisions, losses tied to oil and gas loans, restructuring costs etc.

• Might have to cut dividend? No Bonus? Lay off?

28 Debts Later - Standard Chartered Case• Standard Chartered makes first annual loss since 1989.

• Impairments rose 87 percent to $4 billion from the year-earlier period.

28 Debts Later - Standard Chartered Case

28 Debts Later - HSBC dividend cut?

28 Debts Later - Global Debt Contagion!

• Since the financial crisis, adding nearly $60 trillion in the process of pushing the worldwide debt load to $200 trillion, or nearly three times the size of the entire global economy.

• Are we near the end of the Debt cycle? Is it time for deleveraging?

• How contagious new defaults and financial meltdown will be?

• This is why we are so worried about China (well, EM markets)

28 Debts Later - Global Debt Contagion!

28 Debts Later - Global Debt Contagion!

28 Debts Later - Global Debt Contagion!

What do you think would be a good market trade based on this information?

http://goo.gl/forms/vnNCoRmLsw

Additional Reading• Ray Dalio's Economic Template

• Article: JPM rough Q

• Article: Stock and Oil correlation

• Article: China's Credit Conundrum

• Article: Global Debt Contagion?

• Article: Kyle Bass is Wrong about China?

• Kyle Bass' Letter

• Economic Calendar