John Rubino writes, “The US markets awoke to news of several big, disturbing overseas events:
Glencore implodes. Think of Swiss commodities giant Glencore as a modern version of Enron, in the sense that it owns physical assets like mines and oil wells around the world and runs perhaps the biggest commodities derivatives trading desk. And — also like Enron — it’s apparently unprepared for extreme commodity price volatility. This morning its stock price plunged even further and its credit default swaps — the cost of insuring payment on its its bonds — blew out to record levels.
If Glencore loses its investment grade rating as now seems likely, its access to cheap capital will evaporate and it will fail. This matters for several reasons, the most important of which is the company’s unspecified but certainly huge derivatives book which, like AIG’s in 2008, is a serious threat to the leveraged speculating community.
Commodities from oil to gold are down hard on the news.
Sign up (on the right side) for the instant free Financial Survival Toolkit and free weekly newsletter.