Sunday, June 13, 2021

Prepping for Bankruptcy, PG&E Secures $5.5 Billion in “Debtor-in-Possession” Financing. What is “DIP” Financing?

by Wolf Richter, Wolf Street:

Here’s how a soon-to-be bankrupt company that’ll default on all its debts can still borrow $5.5 billion.

PG&E, the largest gas and electric utility in California, announced on January 14 that the holding company, PG&E Corporation, and its regulated utility subsidiary, Pacific Gas and Electric Company, would file for Chapter 11 bankruptcy “on or about January 29, 2019.” The announcement disclosed that PG&E was negotiating with four unnamed banks to line up $5.5 billion in “Debtor-in-Possession” (DIP) financing to fund the company through the bankruptcy process.

Expectations for Gold and Silver in 2019 – Craig Hemke (02/01/2019)

by Craig Hemke, Sprott Money:

As 2018 drew to a close, the prices of Comex gold and silver began to move higher. This was just as expected and we wrote about these pending year-end rallies on several occasions. Before going further, perhaps you should take time to review these links: 

 

The rallies have proceeded almost entirely as projected and, as the new year begins, several of our short-term price goals have been achieved. In Comex gold, we anticipated that a break of the 200-day moving average would serve to accelerate price toward the psychologically-important $1300 level. This is occurring as I type and, once $1300 falls, the final short-term objective becomes $1310. 

Market Report: Weaker, but in consolidation pattern

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by Alasdair Macleod, GoldMoney:

Gold and silver continued their consolidation of the last few weeks, becoming progressively less overbought in the process. Since last Friday’s close, gold was down $18 by early trade in Europe this morning, at $1329. Silver over the same time-frame is down only six cents at $16.60.

The principal factor behind gold’s weakness relative to silver is the dollar’s continuing dead-cat bounce, where its index futures cash value gained about 1% over the week. Under the pretext of rising US Treasury bond yields, the bears have been able to induce relative weakness in the gold futures contract.

We know from our research that this argument is on slippery ground, being based on the proposition that a higher opportunity cost of holding a non-interest paying asset is rising. Instead, gold tends to rise over time in line with bond yields until, and only if, interest rates are lifted sufficiently to kill rising bank credit. This is the key to understanding the relationship. If the Fed and other central banks are too slow to raise rates, forward-looking inflation indicators, such as gold, will continue to rise.

More evidence emerged this week that the Fed should increase the Fed Funds Rate over the course of this year. The IMF in its recent World Economic Outlook upgraded the prospects for the US economy by 0.4%, following budget agreement on tax cuts. Given the tax stimulus is aimed at the non-financial economy, this is probably a goal-seeking conservative estimate.

Not that this is evidence of successful economic policies. It is clear the tax cuts will have a stimulative effect on the short term, as the extra money is spent. But essentially, they are inflationary, and that is the principal problem for 2018.

This analysis fits in with a bullish outlook for gold, and the technical chart should be regarded in this light. This is reproduced next.

Gold is still consolidating in the region bounded by the two dotted lines. Furthermore, the moving averages are in bullish formation, with both rising and the 55-day above the 200-day. The gold price has dipped back to test support towards the lower end of the consolidation channel, where the 55-day MA resides. It’s a textbook bullish set-up, prior to an expected break-out to the upside.

That said, things rarely work out so simply. The Commercials on Comex, who essentially make the price, are net short and can be expected to use any excuse to upset this technical outlook. And we must bear in mind that speculators with highly geared long positions are nervous animals, easily spooked.

Read More @ GoldMoney.com

The Impossible Recession in the World’s Playground

by Marin Katusa, Katusa Research:

Over the last six months, it has become very apparent that our global economy is changing. Yet most investors seem entirely complacent.

FTD’s™, aka Financially Transmitted Diseases, will start to appear and be used more frequently.

And the policymakers at central banks globally will apply these FTD’s to combat everything you’re reading about in headlines today to battle recessions and a deflationary market.

The global economy is experiencing tailwinds, headwinds, and crosswinds like never before…

“No Need To Be Pessimistic” – World’s Biggest Pension Fund Suffers Record Collapse In Q4

from ZeroHedge:

“fleshwound”?

The world’s largest pension fund – in the world’s most demographically-challenged nation – suffered a stunning record loss in the last quarter as its Abe-supporting domestic-stock-buying-spree crushed Japan’s Government Pension Investment Fund (GPIF).

Americans Mobilize: Trump Must Join United States To The New Silk Road

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from LaRouchePAC:

Helga Zepp-LaRouche said yesterday that Trump’s supporters must mobilize for the President to bring America into the China-initiated Belt and Road Initiative of worldwide building of new infrastructure. The issue of that “win-win” initiative, and whether the United States joins in its worldwide projects and also builds its own new-technology infrastructure, is central to peace between the United States and Russia and China; to Trump’s surviving the ongoing coup against him; and to the revival of the United States as an industrial power.

On Aug. 20 both China Daily and People’s Daily ran major articles highlighting Lyndon and Helga LaRouche’s role both in conceptualizing the New Silk Road or World Land-Bridge policy decades ago, and in bringing that policy to the United States and Europe as China adopted it. Their movement is the power to bring the Trump Presidency to it. Helga LaRouche said that movement must now mobilize Trump supporters to get Trump into the Belt and Road. British-driven efforts by Steven Bannon, for example, to poison Trump’s base against the Belt and Road Initiative, have to be countered by this movement.

On Aug. 26, Helga LaRouche addressed a Manhattan conference on “Reviving Alexander Hamilton’s American System through LaRouche’s Four Laws,” which itself brought together overlapping circles of Trump activists and Chinese-American activists, along with engineers and citizens organizing to rebuild the New York region’s crumbling transportation system.

“Just think what enormous potential is opening up if the United States would cooperate with the Belt and Road Initiative,” Helga told the conference. “This could rebuild its own middle-level industry. They could invest in all of the projects in Latin America, Africa, and along the Eurasian Land-Bridge. It would just completely change the situation and also rebuild the United States. You could have complete change in the United States. You could have 50 new cities. Why not build 50 new cities? Basically, between the coasts, there are many states which are completely thinly populated, almost no cities; you could connect those cities with those of the coasts with the fast train system, you could have science cities….

“I think it is really important to imagine a completely different system. If the United States would now do what Franklin D. Roosevelt did — a New Deal, Glass-Steagall, cooperate with China — the United States could experience an industrial revolution bigger than any time in its own history. People just have to imagine that we are right now at the end of a system, a system which cannot be saved. We need to replace it with a completely new system, and most people have just a hard time to imagine that, but there are examples of such changes. For example, the Marshall Plan in Europe was such an example, and the Meiji Restoration in Japan was such an example — what Roosevelt did with the New Deal; so people have to just think that such a dramatic change is absolutely possible today.”

Read More @ LaRouchePAC.com

Stimulus Bill: The Fed and Treasury’s Slush Fund Is Actually $4 Trillion

by Pam Martens and Russ Martens, Wall St On Parade:

Senate Majority Leader Mitch McConnell and New York State Senator and Minority Leader Chuck Schumer trotted out to the Senate floor after midnight last night to announce that they had reached a deal on the government stimulus package – the text of which the American public has not seen and only snippets of which have been seen by the members of Congress. Neither the Senate nor the House of Representatives have yet to vote on the bill.

November 10, 2017 – Weekly Wrap-Up with Keith Neumeyer

from Sprott Money:

This week we’re joined by Keith Neumeyer of First Majestic Silver for a discussion of silver supply, silver demand and the ongoing rally in commodities.

 

Read More @ SprottMoney.com

IRS & The Hunt for Taxes Worldwide

by Martin Armstrong, Armstrong Economics:

COMMENT: Marty…: My respected Australian broker in Sydney, to my horror today, has, for the first time, just asked me to supply the USA Internal Revenue Service with my Tax File Number because of a new requirement in the W8-ben form, otherwise he advises me that I will run the risk that they may withhold 30 percent of my sale proceeds every time I sell my shares. This is completely different to tax being held on dividends paid by stocks that I may hold, which was the previous legislation which may still be applicable.

PG&E Suspends Dividends, “Uncertainty Related to Causes” of Bay Area Wildfires. Shares Plunge Further

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by Wolf Richter, Wolf Street:

California utility goes for “cash conservation.” Investors, not just rate payers, to foot the bill. 

Wednesday evening, two sleepy trading days before the long Christmas weekend, when no one was supposed to pay attention, Pacific Gas and Electric, the Northern California utility that is being investigated and sued for allegedly having triggered the wildfires in the Bay Area, “the most destructive and deadliest in our state’s history,” as the Department of Insurance had put it, announced that it would suspend its dividend.

PG&E shares [PCG] plunged 10% in after-hours trading. Thursday morning, shares plummeted 16.5% to $42.75. They’re now down 38% in total since the beginning of the wildfires that killed 43 people and caused still untold property and environmental damage, including $9 billion in insurance claims so far, with the tally likely to rise further. About three dozen lawsuits have been filed against PG&E.

PG&E’s announcement was terse:

On December 20, 2017, the Boards of Directors of PG&E Corporation (the “Corporation”) and its subsidiary, Pacific Gas and Electric Company (the “Utility”), determined to suspend quarterly cash dividends on both the Corporation’s common stock, beginning with the fourth quarter of 2017, and the Utility’s preferred stock, beginning with the three-month period ending January 31, 2018, due to uncertainty related to causes and potential liabilities associated with the extraordinary October 2017 Northern California wildfires.

In the accompanying press release, PG&E said:

No causes have yet been identified for any of the unprecedented wildfires, which continue to be the subject of ongoing investigations.

However, California is one of the only states in the country in which courts have applied inverse condemnation to events caused by utility equipment. This means that if a utility’s equipment is found to have been a substantial cause of the damage in an event such as a wildfire – even if the utility has followed established inspection and safety rules – the utility may still be liable for property damages and attorneys’ fees associated with that event.

The primary suspect is PG&E’s infrastructure and its maintenance. On October 8, when the wildfires started, heavy winds toppled power poles, transformers, and power lines. And there it gets complicated. On October 23, The Mercury News reported:

For the better part of a decade, California’s utilities have helped to stall the state’s effort to map where their power lines present the highest risk for wildfires, an initiative that critics say could have forced PG&E to strengthen power poles and bolster maintenance efforts before this month’s deadly North Bay fires.

A review of the mapping project by the Bay Area News Group shows that utilities have repeatedly asked to slow down the effort and argued as recently as July that, as PG&E put it, certain proposed regulations would “add unnecessary costs to construction and maintenance projects in rural areas.”

Cutting costs and maximizing shareholder value, at its called, for better or worse.

On October 31, as the plot thickened, KQED reported:

Pacific Gas and Electric has informed state regulators of at least eight instances in which trees or tree limbs brought down power lines in the hours when a series of devastating wildfires started in the North Bay earlier this month.

PG&E’s incident reports to the California Public Utilities Commission provide brief accounts of trees toppling in high winds in an area stretching from Potter Valley, in Mendocino County, to the outskirts of Napa late the night of Oct. 8 and early Oct. 9.

The exact location of the incidents is redacted from the documents, released Tuesday by the CPUC. But many of the incidents were located inside or near the perimeters of the wildfires. In most of the reports, PG&E said Cal Fire had taken possession of tree limbs and damaged electrical equipment as part of its investigation into how the wildfires started.

So Wednesday evening, PG&E added in its press release that suspending the dividends “is prudent with respect to cash conservation and is in the best long-term interests of the companies, our customers and our shareholders.”

Read More @ WolfStreet.com

China Officially Re-Joins Gold-Buying Spree

from Russia Insider:

After China’s official gold reserves rose for the first time in around two years (since Oct 2016) in December, Beijing appears to have joined the global gold rush, increasing its gold reserves for the second month in a row in January to 59.94 million ounces.

As we previously notedChina has long been silent on its holdings of gold as many countries are turning away from the greenback.