Oil prices have made a small bounce from sub-$30 to $40, despite a record glut of inventory. Good news for producers? Nope.

A dreaded scenario for U.S. oil bulls might just be becoming a reality.
Some U.S. shale oil producers, including Oasis Petroleum (OAS.N) and Pioneer Natural Resources Co (PXD.N), are activating drilled but uncompleted wells (DUCs) in a reversal in strategy that threatens to bring more crude to a saturated market and dampen any sustained rebound in prices.

Where have we heard this before?

After the financial crisis decimated the market for bundled home loans that weren't backed by the U.S. government, bankers and lenders seized upon a host of alternative assets that could be sliced and diced and served up to investors. Sales of commercial mortgage-backed securities (CMBS), along with collateralized loan obligations (CLOs) consisting of loans made to junk-rated companies, subsequently surged past their pre-crisis highs. Bonds backed by auto loans made to riskier borrowers also proved to be a sweet spot for yield-seeking investors and the companies and bankers that sold such debt to them. People might walk away from their homes, so the bull case went, but in the driving culture that is America, very few would ever willingly choose to fall behind on their car payments. [My Note: What?!?!?]
This state of affairs encouraged new lenders to pile into the subprime auto lending space, including Exeter Finance Corp. and Skopos Financial. Skopos hit the headlines last year for peddling two deep subprime bond deals featuring ultra-low credit scores and sometimes no credit scores at all. The concern has been that such upstarts, often backed by private equity firms, will lower their underwriting standards as they fight for market share in an effort to produce relatively quick returns.
Last week, it appeared the chickens had come home to roost for some subprime auto lenders and investors, with Fitch Ratings warning that delinquencies in subprime car loans had reached a high not seen since October 1996. The number of borrowers who were more than 60 days late on their car bills in February rose 11.6 percent from the same period a year ago, bringing the delinquency rate to a total 5.16 percent, according to the credit rating agency.

From the "Here we go again" playbook. Except its global.

In the past, the value of a commercial property was "the capitalized value of the stream of rents from that property." In this order of things, occupancy rates (content) mattered. Now, commercial properties are not selling content and value but merely value. Meaning, they are selling a "projected increase in price." Meaning, downtown Seattle has entered the phase of Ponzi financing.
"My speculation is that this has been caused by people looking to move their money into the US," Harvey explained. Where did he get this information? From a source within the CBRE Group, a "commercial real estate company based in Los Angeles." This source confirmed that global surplus capital is behind this transition. "It's much more lucrative to build or buy with the hope of selling at an inflated value rather than actual revenue."

See yesterday's News Dump for the reason behind this.

The world’s biggest bond dealers are getting saddled with Treasuries they can’t seem to easily get rid of, adding to evidence of cracks in the $13.3 trillion market for U.S. government debt.
The 22 primary dealers held more Treasuries last month than any time in the last two years, Federal Reserve Bank of New York data show. While at first glance that may suggest a bullish stance, the surge in holdings is more likely the result of investors including central banks dumping the debt on the firms, said JPMorgan Chase & Co. strategist Jay Barry.
Strategists say there are signs that the buildup of Treasuries held by dealers is having a ripple effect, mucking up the plumbing of the financial system. While the holdings show they did their job by soaking up the supply from central banks raising cash to support their currencies, it’s adding to questions about the resilience of the world’s most important market. The Treasury Department is already looking into whether the market isn’t operating as smoothly as it should.

Two of the BRICS

Brazil and South Africa are united by political scandals and economic misfortune. Gloom has descended as the presidents of each country fight off corruption allegations that threaten to end their political careers. For the leaders, Dilma Rousseff and Jacob Zuma, it’s a stunning fall from grace, a humiliation made worse by markets rallying on the prospects of their demise.
“What many thought would be locomotives of growth have become risks,” said Mario Blejer, Argentina’s former central bank governor and a vice-chairman at Banco Hipotecario SA. “They gave the appearance that lots of progress was taking place. Suddenly we saw it was really just a lie.”
The challenge now is whether South Africa and Brazil -- which only became fully fledged democracies over the past 30 years -- can prove they have the ability to clean house as their economies sputter. Failure to do so threatens to undo the gains of the past decade and send markets into a tailspin. It could also fuel social unrest.

Their heydey with investors has long passed. Goldman Sachs closed its BRIC fund last year after it lost 88 percent of its assets since the 2010 peak. South African bonds are the worst performers across emerging markets over the past six months, with the yield on 10-year notes rising to 9.18 percent. Brazil’s real is down 12 percent in the past year despite a rally this year fueled by traders’ optimism that Rousseff will soon be gone.
Of the 40 million people who climbed into Brazil’s middle class during the boom years, almost one in 10 has already slid back down. Across the Atlantic, South Africa’s jobless rate of 24.5 percent is even worse than it was at the start of Zuma’s term and the highest among the 85 countries tracked by Bloomberg.
In systems beset by corruption, Rousseff and Zuma may just have had the misfortune of being in power when the music stopped, according to Mark Blyth, a professor of political science at Brown University in the U.S. In periods of sustained growth, “you don’t notice the corruption,” he said.

Remember Iraq?

In the wake of the death of a US Marine in northwestern Iraq in an ISIS rocket attack on Saturday, the Pentagon has announced they are in the process of deploying an undisclosed number of additional Marines to Iraq to take part in ground combat against ISIS....
The number of troops deployed, and how big a force this will have the US up to in Iraq, remains unknown, but the US was already confirmed to have more troops in Iraq than their diplomatic deal with the Abadi government permitted, and has only increased the number of troops since.

Another anniversary this week

Also, on March 24, 1999, the NATO alliance, led by the United States, began bombing the former Yugoslavia, a conflict that resulted in the creation of Kosovo, a gangster state run by criminals who have been credibly charged with trafficking in human organs and whose leadership is essentially the Albanian Mafia. (That war, by the way, can also be laid at Hillary’s doorstep.)
As I warned my readers at the time, the US alliance with the “Kosovo Liberation Army” has resulted in the unleashing of Albanian ultra-nationalism — and today we see that the Kosovo government is being violently challenged by a movement that seeks to create a “Greater Albania.”

The stock market rally since early February is unloved.

And yet for all the positive signals being sent by stocks, buyers aren’t storming back. In fact, going by one measure of U.S. outflows, investors just yanked more money from American equities that any time since September. Enthusiasm remains bridled as a logjam of investor concerns, from China growth to ineffective central-bank policy and weakening profits, shows no signs of dissipating.
Investors of virtually all types have sold more stock than they’ve purchased, according to Bank of America Corp. In the week ended March 11, the bank’s hedge fund, institutional and private clients sold $3.7 billion, the most since September and the seventh consecutive week of withdrawals, the company said in a note last week. Net sales by institutions were the second-biggest since the bank began recording the data.
The other issue is earnings. As economists lowered projections for this year’s global growth to 3 percent from 3.6 percent in August, analysts cut profit estimates. They now expect a 2.9 percent increase in net income for U.S. companies in 2016, down from 7.1 percent in December, and profit declines in Europe. Worldwide, there have never been as many earnings downgrades versus upgrades as there are now, according to the annual averages of a Citigroup Inc. index tracking the changes.
“I’m not buying anything; I’m sitting on my hands and waiting,” said Michael Woischneck, an equities fund manager who oversees the equivalent of $166 million at Lampe Asset Management in Dusseldorf, Germany. “I would definitely sell this rally because it’s totally central-bank driven and has nothing or very little to do with fundamentals.”