Tardy To The Party…Again


According To Standard And Poor’s…Halliburton Is An Investment Grade Credit…

S&P Global Ratings
Halliburton Co. Rating Lowered To ‘BBB+’ On Expected Weaker Credit Measures Due To Lower Prices; Outlook Negative

26-Mar-2020 12:44 EDT

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Table of Contents

…We anticipate the oilfield services industry will experience material weakness due to capital spending cuts announced by oil and gas exploration and production companies, driven by sharply lower oil and natural gas prices.
…Oil prices have declined significantly after the OPEC+ alliance failed to reach an agreement to limit supply, at a time when there are significant reductions in global demand due to the spread of the coronavirus.
…We forecast that Halliburton Co.’s credit measures will be weaker than our expectations for the ‘A-‘ rating through 2021.
…We are lowering our long-term issuer credit rating and issue-level ratings on the company’s unsecured debt to ‘BBB+’ from ‘A-‘. We maintain our short-term issuer credit and commercial paper rating at ‘A-2’.
…The outlook remains negative.


That This Is Oilfield Service “Giant” Halliburton Makes No Matter…So Many Other Companies…Across Industries…In Similar Situations.

That Is…A Brutal Cash Flow Dilemma + A Credit Rating That Is NEVER Tough Enough.


Equity Prices Lead Credit Downgrades…ALMOST ALWAYS…As In This Case.

A Tardy Downgrade = Standard Operating Procedure For Standard And Poor’s.

Still…Maintaining Investment Grade…Not So Sure About That.


For Now…Equity Investors Have Voted That The Business Is Challenged Enough To Cut Halliburton’s Valuation By 88.33% In About 2 Years.

But Somehow…Despite The High Hurdles In The Oilfield Industry…Its Ability To Refinance + Service Its Debt Is Generally Unencumbered …And Considered…Essentially…A Prime Credit…At Least According To Standard and Poor’s.


Ironically…One Of The Few Buyers Of Halliburton’s Debentures Just Might Be Your Federal Reserve…With Their Recently Initiated Corporate Bond Buying Program.

And Halliburton Would Currently Qualify For The Portfolio…Since It Is Still “Investment Grade“.

Of Course…Just A Matter Of Time Before The Fed Broadens That Qualification To Less Than Investment Grade Credits Too…aka “Junk”…As A Record Number Of Of BBB Credits Are On The Cusp Of Downgrade To “Junk.”


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1. iShares Equity Index Might Have To Re-Brand.
2. Suggestion = “Just Like The SPY Index.”


It Is LOW VOLATILITY…Until It Isn’t.

And Now…It Surely Isn’t.

34.44% Draw-Down In Just 5 Weeks…Virtually Matching The SPY’s 35.63% Decline.


The Marketing Literature At iShares Indicates The Following:


1. Exposure to U.S. stocks with potentially less risk

2. Historically, USMV has declined less than the market during market downturns

3. Consider USMV for a core position in a portfolio


Now…Consider The Underlying Volatility Of USMV vs. SPY

Pretty Much The Same…


How Many Ubiquitous Equity ETF’s Are There…Simply Replicating The SPY’s Performance…Despite Bold Assertions & Fancy Titles To The Contrary?


What A Joke.


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1. The Brutal Trade-Off.
2. 15,436 Human Lives Vs. $83.5T Global Economy.
3. Perceived “Terra Firma” Economy Was Really Quicksand.


.00002% Of The Earth’s 7.7B Occupants Have Now Died From Covid-19.

The Death Rate…Unfortunately…Destined To Grow.

Still…A Very…Very Low Number.


The Fragility Of The Current “Capitalistic” Structure Is Dramatically Exposed.

Chair Powell’s Frequently Cited Platitude…”The Economy Is In A Good Place.“…Could Not Be More Wrong.

How “Good” Can An Economy Be If It Is Shattered In Just 5 Short Weeks?


The Burdens Of A Decade Of Staggering Debt + Monetary Growth Are Monumental.

The “Capitalistic” Solution To The Covid-19 Black Swan = The ’09 Playbook++.

More Debt + More Newly Printed Central Bank Notes To Support Over-Priced Financial Asset Markets + Over Levered Balance Sheets Of Corporate Americ’er…

Intentionally Created By The Money Tree Policies Of Chair Powell And His Global Colleagues.


The Definition Of Insanity = “Doing The Same Thing Over And Over And Expecting A Different Result.”

Time Will Pass…And The Black Swan Will…Inevitably…Appear Once Again…Hopelessly Attracted To Endless Central Banker Insanity.



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1. U.S. Deficits + Debt = Already Massive…Prepare For “MASSIVE-ER”.
2. $1 Trillion Here…$1 Trillion There…It’s All Monopoly Money Now.


With All The Federal Dollar Giveaways Announced In The Past 24 Hours…

1. Helicopter Money
2. April 15 Tax Payment Deferrals
3. Mortgage Payment Deferral
4. Payroll Tax Cut [likely]
5. Airline Bailout
6. Boeing Bailout
7. “Fill In The Blank” Bailout

….One Might Postulate That The U.S. Federal Budget Was In Stellar Shape.

Actually…It’s Never Been Worse…But Nobody Seems To Care…At Least For Now.


Consider The Following Charts…

First Of All…

Amazingly…The U.S. [on a 12 month rolling basis] Has NOT Produced A Budget Surplus Since Mid/Late 2001.

Just Ponder That For A Moment. What Were You Doing In 2001?


Second Of All…

The Absolute Amount Of Debt…Since 2001 Has Risen 350% To A Staggering $22.5T++.


Thirdly…The U.S.Economy Has Also Grown Since 2001…So The Debt/GDP Quotient Must Also Be Considered.

It’s Essentially Doubled Since 2001…But Has Stabilized…At A Very High Level…Since 2014.

That’ll Soon Change To A Much Higher Number…As The Economic Impact From The Corona Virus Will Dramatically Effect The Quotient…Numerator Up Big/Denominator Down Big.


So…There Is A Boatload Of Debt…But Then…If You Are Going To Gorge On Debt…It Might As Well Be Cheap…And It Certainly Has Been…At Least For Large Multi-Nationals.

The Federal Funds Rate Weighted Average Since 2001 Has Approximated Just 2%…The Lowest 20 Year Weighted Average In U.S. History.


And While Money Is Cheap To Borrow…Demand For The Super Low Yielding Debt Seems Almost Infinite.

Hence…The Deficit Spending Policies Of The U.S. Congress [whether under Democrats or Republicans] Are Effectively Unleashed…With No Real Limitations.

And Not So Coincidentally…Much Of The Demand For This Congressionally Produced Debt Is Satisfied By The Federal Reserve.

BTW…The Fed Pays For The National Debt With Newly Printed Dollars And Is Not  Even Compelled To Ask For Permission…From Anybody.  The Discretion Is All Theirs.


Thus…The Interests Of The U.S. Congress + The Federal Reserve Absurdly Coalesce…Creating A Debt Gorged Bureaucracy.

Making Matters Even More Conflicted…The Federal Reserve Returns Its Interest Payments To The U.S. Treasury…Effectively Reducing The Already Depressed Interest Costs [set by the same Federal Reserve].

These Convoluted Financial Operations Are Softly Endorsed By The 2 Major Credit Rating Agencies…Moodys + Standard + Poors…Both Of Which…For Some Bizarre Reason…Believe That Monetizing Federal Debt Is A Legitimate Role For A Central Bank.


And Still…Despite This Triangulated Den Of Thieves…The U.S. Economy Has Been Brought To Its Knees By An Invisible Viral Enemy.

The U.S. Population Is Almost Universally Freaking Out While The Federal Government Concocts New Tactics To Give Away Federal Dollars To John Q. Public…In Order To Blunt The Economic Hurt.

Treasury Secretary Mnuchin Wants To Give Each Adult At least $1000…Maybe $2000…This Politically Driven Tactic Is Borderline Laughable …Sort Of Like The Obama Giveaway Years Ago.

And It Seems Those $1000 Checks Will Probably Be Quickly Spent By Hoarding Households…On Canned Goods + Toilet Paper…As Faith In The Prez Donny T’s Response To The Crisis Is Miserably Low.


And So It Has Begun…The Greatest Monetary Cage Fight Of All Time.

The U.S. Debt Generating Machine [aka U.S. Congress]
The Central Bank Debt Consuming Machine [aka Federal Reserve].

Who Wins…Who Loses?

McConnell + Pelosi Printing As Many Zeroes On Spending Bills Until The Black Ink In Their Pens Runs Dry.
The Federal Reserve… Desperately Stockpiling Green Ink For Printing Dollar Bills As Quickly As Possible…To Account For All Those Congressional Zeroes.

It Ought To Be A Real Slug-Fest…But In The End…It Is Likely That Neither Will Win.

Because This 20 Year Era Of Monetary “High Jinks” Just Might Be Concluding…In A 5+ Week Capital Markets Bloodbath…That Has Devastated The Frail U.S. Economy…Built On A Mountain Of Debt.


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