Have We Angered The Economy?

ArrowFlyer86 said:
Thought this was both a good headline and graphic to represent the problem brewing in that space :)
I just wish the arrows were sized to show how tremendously large some of these deals are (on paper... and will never actually materialize into real spend unless the AI market grows by like 20x+ in the next few years).
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Everything that goes up….
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ArrowFlyer86 said:
Good thing nothing uses aluminum!
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Late seeing this. But yeah, it's definitely an issue. On top of prices increasing, some of my vendors just don't have stock of common items. 3003 aluminum diamondplate... Unobtainium for the next month. Minimum

Some of this is due to a large plant burnt down...twice. The plant provides 40% of all aluminum used by the big three automakers. Some of this is due to China hitting export quota and rolling back production.
 
ArrowFlyer86 said:
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I do not believe this is covered, or maybe some overlap, are the 7.6 Million in a forbearance program challenged in court and found unconstitutional (I think, or at least the program was halted). Stage one happened back in Feb as I recall, and now DOE has started to send out to the participants the program is ending and they either need to start making payments (not sure about catch up provisions), or enroll in another program. Many of which are now much harder to qualify for.
Anyways, here is an article that I think hits the highlights: https://www.cnbc.com/2025/12/10/student-loan-options-save-forbearance.html


Tim
 
I have heard through the grape vine that propylene glycol is becoming one of the latest unobtaniums
 
To keep it aviation related, Spirit ALPA sent out the public statement about their pilot group endorsing the paycut. 8% paycut (15% inflation adjusted to 2023 payrate ratification, 50% reduction in DC contribution. That's def not gonna help out the Xmas season.

The toilet bowl spiral tightens on the wage economy.
 
hindsight2020 said:
To keep it aviation related, Spirit ALPA sent out the public statement about their pilot group endorsing the paycut. 8% paycut (15% inflation adjusted to 2023 payrate ratification, 50% reduction in DC contribution. That's def not gonna help out the Xmas season.

The toilet bowl spiral tightens on the wage economy.
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Well, Spirit has been bankrupt for a while now, whether filed or not. That spiral wasn’t surprising.
 
Re: Economy.

I find this juxtaposition amusing.

Today
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Same guy, exactly 3 months ago
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Maybe PE/Credit fears are well-founded after all?
 
Speaking of that trend in credit...
Totally normal to go from 100 -> 0 value.... Again...
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KE5BM said:
Could you explain what this means for the 5th graders in here? Like me?
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BlackRock is doing mark to market. e.g. They have a private loan that due to some condition not specified they now feel the loan is worthless. It could be the loan is in default due to non-payment, it could be the loan could be in technical default (e.g. failed to meet some condition like revenue ratios).

There is a fair amount of concern in the marketplace that a lot of private loans do not meet public underwriting standards, and there are trillions (yes, that word starts with a T) in private loans, and there is no clearing house or central registry of all these loans. So, this could by a fly in the ointment of the financial system, or it could be an earthquake of magnitude 9. No one knows, which makes the fear worse.

Tim
 
Racerx said:
Late seeing this. But yeah, it's definitely an issue. On top of prices increasing, some of my vendors just don't have stock of common items. 3003 aluminum diamondplate... Unobtainium for the next month. Minimum

Some of this is due to a large plant burnt down...twice. The plant provides 40% of all aluminum used by the big three automakers. Some of this is due to China hitting export quota and rolling back production.
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Aluminum hasn't gone down. Just ordered nearly 2,000 pounds of aluminum (sq tube, round bar, and flat stock) for ~6 bucks a pound.

Not long ago it was below 2 dollars a pound.
 
KE5BM said:
Could you explain what this means for the 5th graders in here? Like me?
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Normally when a company is experiencing trouble and its future is in doubt, you'll see its stock, bond and loan prices decline. Those market prices serve as a barometer of health to the public and can be a warning light that this company is experiencing trouble (e.g., if a stock in your portfolio is in constant decline, there must be a reason, right?). The process is usually gradual; companies don't just go from perfect to failure overnight.

Compare that to private credit. The loans made between "Borrower A" and "Creditor B" don't trade, so there's no market place to look at their price (normal bonds/loans DO have a mkt place). Plus the details behind them are private. Practically speaking this means that when the investment firm who made the loan ("Creditor B") periodically values their loans to "Borrower A" it's more art than science. And periodically they have to do this because they have their own investors who want to know how things are doing. It's important to note that because of how their bonuses are calculated and their incentive structures in general, "Creditor B" is highly incentivized to be... shall we say, "optimistic" about the value of their holdings.

In the headline I pasted above: what you're seeing is that Blackrock-HPS marked the loan down overnight from 100 (essentially a perfect score) to 0 (a total 100% write-off... meaning it has $0.00 value). If you're an investor in that -- that's scary. You went from yesterday "This loan is perfect, their payments have been on time, everything is great" to "HOLY ****, THIS THING IS WORTH NOTHING". There was no intermediate phase of difficulty or doubt. While this single loan might be tiny in the portfolio (we don't know), it makes investors wonder how many other loans in their portfolio are marked at 100 but are actually 0s. And the issue is that this has happened multiple times in the last 3-6 months.

(Also adding to turmoil is the fact that people are freaking out that software companies might tank in value because of AI -- and private credit is disproportionately exposed to software companies)
 
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That was very helpful, Time & Arrow thank you. I suppose it's of even greater concern because it's BlackRock.
 
KE5BM said:
I suppose it's of even greater concern because it's BlackRock.
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Indeed. Many companies are caught up in it and it's pretty much the who's who of high-finance: KKR, Blackstone, Blue Owl, Apollo, Ares, ... The "smartest guys in the room", so to speak.

As more people move towards the exits and try to cash out their investments in these things, they're finding they can't (cuz private credit is not liquid; it doesn't trade). So that feeds into the sense of fear and exacerbates the problem. Could end up being a whole lot of concern over nothing, or it could turn out to be not enough panic. Really depends on what loans are lurking in their portfolio, which no one can see. Time will tell :popcorn:
 
“why has the canary died”… could be it was an old canary in that cage…. Could be the mine is filling with gas… if another canary drops it’s time to evacuate.. just my unsolicited opinion.
 
Buy silver!! :)


Edit: physically deliverable precious metal bars (even more so when had in hand) of any type are the historically good investments in volatile times like now. Fiat currencies can be fickle….
 
How big a deal is O&G bouncing around $100bbl going to be on the stock market?
The reason I ask is I have heard numbers by multiple pundits that roughly the top 20% of income earners represent 60% of discretionary spending. And the top 20% of income earners are very much tied into how the stock market is doing.

So if the stock market tanks, the top 20% of income earners pair back discretionary spending, and suddenly you have a recession. At least that is what the pundits are stating is a looming possibility. (Highest chance I have seen given I think was 35% this year). Even the prediction markets like Kalshi have increased the odds of a recession this year, all seem to be tied to the war in Iran affecting gas prices.

I am not making any changes, but it still has me wondering. Is this the proverbial stray that broke the camel's back?

Tim
 
tspear said:
I am not making any changes, but it still has me wondering. Is this the proverbial stray that broke the camel's back?
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Probably not. Oil back down into the 80s today.

As far as the market goes, take the long view, and try to keep things in perspective:

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Only change I am making, is no change from normal. Once a quarter I rebalance, that is about it.

Personally, I think the market is underestimating the consequences of the attack on Iran. There is very little we can offer Iran to get them to the table; while there is a lot of asymmetric warfare capabilities that Iran can do toward the energy sector that will have an outsized economic impact on the USA. Further when you consider how slow Iran historically has been to respond to an attack, means this play has a long way to go.

Tim
 
At 7am, the press was screaming $150 oil. By market close, they had walked that back and were all smiles. We'll see how it all plays out. But, Costco gas in my town is already up over a dollar a gallon since this time last week.

I'm sitting pat, already fairly conservative.
 
I drive a diesel vehicle. When I moved to Cape Cod 4 years ago, diesel fuel here was over $7 a gallon. Today, it's about $4.50 after rising almost a dollar. The way I see it, we're still doing alright no matter what the talking (screaming) heads in the media are selling at the moment. I distinctly remember watching the price of diesel in Virginia go from $2.09 to $4+ in less than 3 days when Russia decided to play stupid games with Ukraine.
 
KE5BM said:
I distinctly remember watching the price of diesel in Virginia go from $2.09 to $4+ in less than 3 days when Russia decided to play stupid games with Ukraine.
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Up like a rocket, down like a feather.

Boy has that been true for almost everything in the last five years, it seems.
 
AvNavCom said:
Up like a rocket, down like a feather.

Boy has that been true for almost everything in the last five years, it seems.
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Only because "we" kept buying it. Very few things are absolute necesities. If a significant fraction of the population would just not buy that product for a few weeks/months, things would get back to normal a lot quicker. Bit we're not that united/coordinated, and that's the end result.
 
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well, that and credit lending affords the marshmallow experiment usual suspects the ability to incur the tragedy of the Commons that is their quintessentially american lack of impulse control. It's beyond specious for the financed millionaire sycophants to turn around and argue price discovery has been attained (pointing at clown zillow, tradeaplane et al), when lending keeps putting a giant thumb on the scale.
 
tspear said:
How big a deal is O&G bouncing around $100bbl going to be on the stock market?
The reason I ask is I have heard numbers by multiple pundits that roughly the top 20% of income earners represent 60% of discretionary spending. And the top 20% of income earners are very much tied into how the stock market is doing.

So if the stock market tanks, the top 20% of income earners pair back discretionary spending, and suddenly you have a recession. At least that is what the pundits are stating is a looming possibility. (Highest chance I have seen given I think was 35% this year). Even the prediction markets like Kalshi have increased the odds of a recession this year, all seem to be tied to the war in Iran affecting gas prices.

I am not making any changes, but it still has me wondering. Is this the proverbial stray that broke the camel's back?

Tim
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Most everyone in O&G expects the Iran turmoil to last less than a few months, so no one is making any long term decisions at the moment. The big players don't want 100bbl oil anyway. Everyone would prefer it stay in the $75-80/bbl range forever. Everyone makes money, prices stay reasonable, upstream and downstream remain in stasis.

When oil prices go crazy, the cost of going after it causes a bunch of strain on labor and capital. We've gotten VERY good at getting large volumes of oil out with fewer assets and human capital over the past 15 years.

Markets aren't panicking like newsroom pundits because people are not expecting the Strait of Hormuz to be closed off for 6 months. The further we go down that road, the more panic will set into the markets.

Sent from my SM-S938U1 using Tapatalk
 
My eye is on any strange activity around Taiwan… Ukraine has depleted resources, Iran had depleted resources, I just hope that china doesn’t start looking around and think the timing is right to make a move on it’s very clearly stated goal of reunification. Then all bets are off on markets across the board.
 
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Just remember, and I didn't say this first: "Wall Street climbs a wall of worry". Over the long-term stock rise, with random fluctuations along the way. Any money you think you'll need in the next 3 years should be in cash or cash equivalents. Beyond that, don't try to outguess the market. I've had a fair amount of good luck timing the market, but for the most part it was accidental. I am NOT complaining about my results, though.
 
The Mayuree Naree is a dry goods shipper, not an oil tanker. The article doesn't specify about any others. The Naree was also light, so not loaded down with enough cargo to be of consequence.

Edit: Article specifies second ship is a "container" ship so not an oil tanker. Doesn't specify the third, just says "cargo."
 
KE5BM said:
The Mayuree Naree is a dry goods shipper, not an oil tanker. The article doesn't specify about any others. The Naree was also light, so not loaded down with enough cargo to be of consequence.

Edit: Article specifies second ship is a "container" ship so not an oil tanker. Doesn't specify the third, just says "cargo."
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Yes, I said cargo. The consequences are this is effectively a warning to other ships. Cross at your peril. It is also a rather blatant response to the threats from the current administration.

Tim
 
I didn't mean for that to sound like I was calling you out, Tim. I should've been more specific that the media is making the situation sound like those three ships were oil tankers. Certainly it's a concern for other ships which is why the President had suggested the Navy begin escorting merchant ships through the Strait which isn't a bad idea when there's a war in the area regardless of who/why.
 
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