Home » Economic Predictions » The Perfect Storm in Oil Prices Will Hit in the Ides of March

The Perfect Storm in Oil Prices Will Hit in the Ides of March

By Tech. Sgt. David McLeod (Defenseimagery.mil, VIRIN DF-ST-92-09166) [Public domain], via Wikimedia Commons

While some business / economic publications, like NewsMax are saying that, “Oil is pulling away from the market’s biggest storm in seven years,” I say, “Don’t believe it.” Not for one second. The real storm begins near the middle of March.

Because people saw that the price of oil rose and stabilized in February and that stocks followed in lockstep, they were quick to conclude the worst is over. The final days of February were, in fact, nothing more than the calm before the main storm. People were, as usual, too quick to sigh in relief, and that relief is likely to make the upset even worse when they find out how wrong they were to think the worst is over. When people believe the worst is over, and suddenly things grow even worse than they already were, they are more likely to panic.

We have seen this pattern of human naiveté again and again during the so-called “recovery” from the Great Recession. What really happened in February was a little consolidation, as both oil and stock caught their breath after a long first leg down in prices, but the worst pressures that I’ve been predicting were never set to come in February, but to start in March.

I am amazed at how these publications continue parroting each other’s statements that the Saudis and Russians achieved a great agreement to resolve the problem of an oversupply of oil. While NewMax points out the many swings the argument took last month and even that the Saudis and Russians really only agreed not to make the problem worse, the article still seems to come down on the side that this agreement means the oil market has now stabilized and prices will rise to $40 a barrel very shortly.

As I’ve laid out in my last article (so won’t go into much detail here), the so-called “pact” between Saudi Arabia and Russia accomplished the exact opposite of what all the parrots are squawking about.


US oil production stays at forty-three year high


While Saudi Arabia and Russia actually teamed up to make it clear they will not reduce oil production by a single drop to help solve the oil supply problem, four OPEC members, other than Saudi Arabia, also agreed not to make any production cuts. So, oversupply is absolutely certain to continue.

What some people don’t realize is that the United States has actually been increasing production during this time. The last time the United States pumped at this present rate was 1972. US oil production has grown 82% since 2008, rising 8% last year alone.

Shale-oil producers may be holding up better than the Saudis anticipated because the major oil producers have the muscle and reserve to make it through the present price wars by changing the focus of their current business activities. They are finding bargains in drilling  costs now as the smaller producers go out of work and people become willing to work for the major producers for less. This is a good time to drill new wells because drilling produces no oil anyway, making it a good time to devote money in that direction. In a large oil company’s planning, it is something that has to be done for future production, so ramp it now by focusing assets in that direction while the costs are lower, and you’ll be set to make big money when prices move back up and those wells become ready for actual production. All of which means, the major US oil companies are increasing their production capacity as the smaller companies around them fail. The failure of small companies also makes for a good time to get good prices on equipment.

It has never been the large oil producers that have been likely to go out of business. The problem is with the numerous small companies that cannot afford to weather a long storm. At least forty smaller companies have shut down since 2014. The rapid growth of many small contractors in the oil industry that fed the US job expansion during the “recovery” period will continue to shrivel, so this consolidation of businesses is bad news right at the heart of the “recovery.” The bonds they have used to finance their expansion will continue to go bust. Many jobs have already evaporated along with the small companies that have blown away in the dusty oil fields.

Not all major oil companies, however, are weathering the storm well. Oil production giant, Halliburton, for example, has already cut over 26,000 jobs since its 2014 peak. Halliburton speaks a very different story to the dominant theme in mainstream media that the worst is over:


“Our industry has turned down faster than anyone ever expected,” Halliburton CEO Dave Lesar and President Jeff Miller said in a memo to employees obtained by CNNMoney. The execs said it’s now clear that business opportunities will be “much worse than anticipated” coming into the year…. Halliburton has also attempted to cope with cheap oil by consolidating facilities in 20 countries and closing down operations altogether in another two countries. The oil downturn has sent Halliburton’s profits plunging. Its stock price has lost more than half its value since mid-2014 when crude prices peaked. (CNN Money)


26,000 jobs cut by just one company is no small dent in the recovery, and Halliburton doesn’t sound like its outlook for the industry is as good now as it was at the start of the year.

In December, production rates finally did start to fall a little in the US as the toll taken by the initial storm finally started to become visible. Production rates are still falling. While the industry is finally starting to feel the crush, that’s not going to be enough reduction in production to help the price of oil in the near future. The US decline in production is minor so far, and the coming combined storms are major.

This month, three storms will converge upon those businesses who focus on the production side of oil.


March madness begins in the maintenance season for oil


I’ve been pointing out for the past couple of months that we were nearing the oil industry’s huge annual maintenance season. This month, we enter it. The big refineries typically shut down a number of operations in March, after heating oil demands and oil-fired electricity demands are down and before summer travel demands for gasoline, diesel, and jet fuel all rise, in order to make repairs throughout their refineries.

It’s a time when there is naturally less demand for oil, so the industries go into maintenance mode. The amount of refining that gets done this time of year drops. That means the backup of oil due to oversupply to the refineries should become worse this month.

It is during this time that I think oil prices could touch down into the high teens, causing more already-marginal companies to throw in the towel.  Numerous small contractors in the oil business will find the toughening situation breaks them, and that means more failing bonds and more strained banks.



Shale Boom, Shale Bust: The Myth of Saudi America  In 2014, something went terribly wrong with this rosy scenario of “Saudi America.” An unexpected collapse in the price of oil is bankrupting the oil patch, destroying jobs and threatening plans for a renewable energy future.


Iran marches on


Iran is marching forward without a flinch in its plans to ramp up oil production and sales to 2,000,000 barrels per day. They now anticipate hitting that number in March if you combine their crude and condensate sales (fine liquid oil that condenses out of natural gas). That is sooner than they projected a month ago.

While Saudi Arabia and Russia agreed not to expand production further, Iran now rightly points out that the talk of oil production cuts was always “a joke.” There was never a chance, as I also pointed out on this blog, that either the Saudis or the Russians were going to voluntarily cut production in the price war they are using to try to recover market share from rapidly expanding US producers. Their pact really says, “Oversupply will end when enough US companies go out of business.”

With Iran promising to expand production this month (and already succeeding in doing so), and with oil refineries not being able to do much refining, the backup of crude could get large enough to quickly reach the point where there are no tanks left for storing oil or natural gas. That is the major inflection point at which everyone will be forced to slow production temporarily but only because they cannot sell oil at all. I expect that major backup to cause the next severe downward leg in oil prices.

Stocks have been marching in lockstep, so they are likely to also plummet with the greater drop in the price of oil, causing the next leg in the crash of the stock market. As I’ve said all along, that crash will unfold in numerous downward legs, separated by smaller rallies, over the course of a year to a year-and-a-half.


Revelers during the Ides of March will be stunned


While many are blowing their party whistles on the oil-price-stabilization bandwagon, I do have some company in my dire predictions for a short-term oil price crash. Deloitte said in a report a week ago that 75% of oil exploration companies could default on their debt, ending in bankruptcy, where they either restructure their debts or, in the worst cases, go out of business.

Another person who sees the coming storm as I do is John Kilduff, founding partner of Again Capital, which specializes in energy trading:


We’re in the red zone, and we’re about to go over the goal line here for that actual pain point…. The rich are going to get richer, but companies like Chesapeake, unfortunately I think, is among the road kill, Goodrich Petroleum…. We are definitely going to see [$18/barrel oil]…. Now you’re seeing refineries go into maintenance…. Oil is going to back up big time in the system here.  (Nightly Business Report)


As I’ve said, the increased backup of oil will be caused by the perfect storm coming in on the convergence of three different fronts: 1) the agreement by Russia and Saudi Arabia to maintain full-tilt production converging with 2) the post-sanction arrival of Iran back into the marketplace just as 3) the oil industry goes into maintenance mode and so needs even less oil, not more.

Kilduff says he thinks BP is another company that is going to wind up deep enough in distress that it will be bought up by some other massive conglomerate. Kilduff also predicts Chesapeake — a major oil producer and the second largest natural gas producer in the US — will go under. Chesapeake lost more than $14 billion last year on the downturn. It says it will sell off many of its assets this year to pay down its debts. So, the major fire sales are also beginning.

According to Kilduff, we are, just this month, reaching that ultimate pain point. A desert storm is gathering over the oil fields.


More reading on oil wars and oil price wars:

  • James King

    it is now the 18th. Still waiting for that perfect storm you talked about

  • Davebee

    It’s 09:26pm in the evening 2016-03-17 where I am and I see some reality taking place on my screen:The Dow is at plus170 and oil is at $41-00 per barrel.
    Nasty reality.

    • Dear King and Dave, I’ve published a full response just for you here:


      Taking note of where I am wrong just seemed too important to have it buried here in comments that don’t get as much attention.

      So, I hope we’ll resume the discussion there.


      • UPDATE:

        From ZeroHedge:

        “What was even more entertaining, is that the so-called “production freeze” came at a time when both Saudi Arabia and Russia, the two most important oil exporters in the world, were already producing crude at the highest recorded level – they couldn’t produce more even if they wanted to.

        ‘Then this so-called “freeze” took on a truly bizarre twist one week ago when we first heard what we thought at the time was a cruel rumor, namely that while OPEC production may indeed be frozen, there is absolutely no limitation on exports.”

        In other words, the Saudis and Russians were having a hard time storing all that oil they were producing. They couldn’t produce more. So, they limited production to their current high level, but were rapidly reaching that same point Oklahoma is reaching where all tanks are full. So, they didn’t limit sales as they need to speed up sales in order to keep up with production, or they will be forced to limit production by a sheer lack of tanks space.

        So, as I’ve said all along: “Big deal on their bogus freeze. Tanks are filling up, and if that happens, the worst is yet to come.”

        Oil this week (still in March) sliding back down day after day and now back in the high thirties per barrel, taking the stock market back down with it.

        “Moments ago we learned that this was not in fact a “cruel rumor” but was the whole truth, when Reuters reported that “Russia will export more oil to Europe in April than it has in any month since 2013 – despite Moscow’s plan to sign a global agreement on freezing production in a bid to lift the price of crude.” (ZeroHedge)


  • Davebee

    My own research shows the following: On March 17 2016 oil is at $40-00 per barrel and the DJIA is at 74 green.
    Research to continue….right after my home country is given a kick in the ribs by the ratings agencies and all 50m of us innocent citizens are put on Junk Status even though we committed no fault at all. (Moody’s is in the country right now doing their own detective work)

    • Well, hopefully the kick is hard enough to wake you up to reality. ; )

  • Davebee

    We wont have long to wait will we? Today, March 14 2016 the price of oil is at $40-00 per barrel Tomorrow is within 24 hours of mid March so will this GRB be accurate and show the commencement of an oil price decline trend or an uptick?
    How about the DJIA will that also be greener or redder?
    The suspense is like a Trump rally, will he make a speech or wont he?

    • Yes, here we are. The day after you wrote this, oil prices went down. Today (March 16), they are opening lower still. “Oil dropped for a second day as Iran bolstered crude exports. Russia signalled the Persian Gulf nation [Iran] won’t join major producers in freezing output to reduce a global glut.” ( http://www.afr.com/business/energy/oil/oil-lower-for-second-day-as-iran-says-no-to-freeze-20160315-gnjx4p#ixzz435Rx3i2e )

      Exactly what I’ve said would happen. Iran would start to come online and would DEFINITELY NOT agree to cap oil production, but would, instead, ramp up its oil production.

      If you’ve been reading here, it is no surprise at all to read today that

      “Iranian production climbed last month by the most in almost two decades following the end of sanctions, OPEC said on Monday. US supplies probably rose last week, keeping stockpiles at the highest since 1930…. Iran increased output by 187,800 barrels a day to 3.13 million a day in February, the biggest monthly gain since 1997, OPEC said in its report.” ( http://www.afr.com/business/energy/oil/oil-lower-for-second-day-as-iran-says-no-to-freeze-20160315-gnjx4p#ixzz435TCu5KB )

      Moreover, if you’ve been reading what the “Great Recession Blog” says, you would know that all the excitement over Russia agreeing to curb its production was nothing but stupid euphoria in the first place, because, as I’ve said all along, the cap agreed to between Russia and Saudi Arabia was conditioned on all other major producers agreeing to do the same. I’ve said it several times here on the GRB.

      “Iran’s rejection of the freeze deal and the rise in Iranian production have put an end to the rally.”

      Therefore, now that Iran and Russia have met to talk about Iran joining the production-freeze agreement, and Iran has said it won’t, it is possible that Russia will back out based on the conditions it laid down at the start.

      Just sayin’.

      • Also in the news today:

        “At the Cushing, Okla. storage hub, stocks climbed to about 67.5 million barrels, nearing its working capacity of about 73 million.”

        So, those pressures are rising as I said they would, too. It is when the major hubs mentioned in the article hit their top working capacity, that oversupply will become a significantly bigger problem. It’s one thing to have more oil available than you need. It’s another to have nowhere to put it at all (even the part you don’t need).

        That will become a fascinating scenario to see how producers handle it when there is nowhere left to put supply. They will certainly reduce production at that point because they will be forced to, but the interesting part will be in seeing how they battle that out — who reduces first or how much they are willing to drop price individually in order to avoid being the one to make the first major production cuts.

        So, grab the saddle horn because the ride gets more interesting up ahead. (Wouldn’t want you to miss the fun.”

  • Tawse

    When will these oil refinery shut-downs actually begin? A week? End of month? Already begun? Or is the time around the 15th the usual start?

    More importantly, when will this kind of thing become mainstream news? Does it take several weeks for the shut-down to have an affect on the oil price?

    Interesting thoughts though about this current unexplained in the oil price being manufactured to allow the big players to dump their oil stocks on retail investors – wonder how much truth, if any, there is in it?

    • They usually happen in March. There is not any agreed time for all oil companies, but generally they do their major maintenance March through April. Each company has its own plans. Don’t expect to see the full effect right away, but expect to see the effect start now and to grow worse through the next 30-45 days, reaching its hardest pinch at the END of the maintenance cycle (mid to late April). If you see no affect now, and prices either rise or stabilize, then I’m clearly wrong. However, so far things look right on track with all I’ve been saying about oil prices — that the rally was nonsense, and reality will break through the wishful thinking.

  • Jeff

    A lot of price manipulation going on like everything else. What should the “true” price be ? Less than bottled water ? This is much more than a supply/demand event. If you recall, to get prices to start falling miraculously oil fell $30 with NO demand problems. Sure you can make excuses for that like “the market forecasted that” but it’s more than that. The “engineered” drop in ’08 was the same thing and totally manipulated……. Are you going to factor into your forecast the possibility of war ? Could it be possible the world is storing up the last drop before we get cut off ?

    • It’s never been a demand problem this time around. I mean, demand being weakened is having some effect, but the problem is oversupply because the US has been HUGELY ramping up its supply and its exports, and Russia and OPEC are all refusing to taper their supply off in the face of this stiff competition from the US, as that would only mean they will lose market share. All the supply problem, in other words, will be remedied at their cost, while the US takes over a major piece of the market.

      That’s why their agreement says they will only curb production IF other major players (namely the US and Iran, as it returns to the market), agree to curb their production. So, far the US shows no signs of willingness to agree to that, and Iran has now stated flatly that it will not. So, supply will outstrip demand for the foreseeable future. By the supply side of the Law of Supply and Demand, that means prices will be suppressed for the foreseeable future. You cannot increase supply without decreasing price, unless you are able to expand demand to match supply. But that is far from possible in a world where demand is already weakening. That’s still a situation of supply driving the price, not demand.

      • Jeff

        Thanks for the reply Dave. I understand supply/demand dynamics. I guess what I’m saying is whether the supply/demand #’s are skewed or not, there is still a whole lot of price manipulation going on. It is, after all, what this is all about. Destroying the BRICs that are turning way from the dollar…… Again, I ask you to recall how oil dropped from $110 to $80 when demand was still equal to supply.

        • Hi Jeff,

          I don’t know what price manipulation is going on, but I suspect some is. For example, I Iive where there are numerous refineries, but gasoline has not dipped below $2.00 per gallon and is now at about $2.30 gallon. In Michigan, the price plunged to about $1.50 per gallon in some areas. Why, when I am surrounded by refineries, is my less-populated area higher in price than Michigan? Makes one wonder. Transportation costs to get the gasoline to market should be lower; demand should be lower; and available supply is higher; so, why is price higher? Collusion? I have to wonder, as the price here barely fluctuates any more with the price of crude.

          Still, I don’t see any room for skewing supply and demand because the tanks and tankers tell all with that equation. Clearly the supply is outstripping demand when you hear reports all over the world about tank farms nearing capacity, and tankers remaining out at sea longer as suppliers struggle to find a buyer for the oil.

          Some big price changes are due to speculators and have only some relationship to supply and demand, as speculators look at many things they believe will happen to supply and demand in the future versus what the actual supply and demand are today.

          That is not to say there are no political operations involved. I don’t doubt the US would love to crater Russia and Iran and Venezuela. I just don’t have any factual knowledge that the US is doing that with oil, and I base my projections (be they about the price of oil or the stock market or the economy as a whole) on observable facts, not on theories. From that point alone, I can get to the price of oil going back down and stocks having a lot more fall in store. If there are conspiracies afoot to keep the price of oil down to hurt BRIC’s economies (as there could be), then that only means all the more that prices will come down; but I’m not making my projections based on those ideas.

          They may be true, but I try to stay with as much as I can know in the way of facts, as being a more stable path to predicting where oil prices and the economy are going. (Again, I suspect some price collusion on the upside affecting our local gas pumps, but I have no actual knowledge of that — just don’t know how else to explain why price is not matching the movements in crude or in other parts of the country.)


  • Matthew Schilling

    What about a tariff on imported oil equal to the delta between $40 and the current international price of a barrel of oil? (If the current price is, say $34, then the tariff would be $6). This would establish a floor price for domestic production and end the economic warfare being waged against our domestic industry. In an era of protracted budget deficits, it would provide revenue – and in a better way than an excise tax at the pump. A tariff would support domestic drilling; an excise tax would be one more impediment.
    I know people are allergic to the word “tariff”, so how about we call it an Oil VAT and charge it on every single barrel, foreign and domestic? Then issue a refund to domestic drillers. (This is EXACTLY how the VAT is used today in Germany to support their domestic industry.)
    Why should we really care about a global glut when we are running a 4-5 million barrel a day deficit?

    • Oh, but that would put a wrecking ball into the side of free-trade, and free-trade agreements have been the centerpiece of American self-destruction for decades now. What do you want to do? Strengthen America?

      As for why should we care about the global glut in oil, I would answer, “Certainly not for the oil company’s sake. It’s simply important to know what the effects of the cause will be. The effects will affect you very much. Numerous oil companies have already crashed out of existence or into bankruptcy. Numerous others will follow. Banks are radically juggling their positions now, as I may write about in an article today (we’ll see if I have time) in order to get out of their credit extensions to oil companies. (I mean some MAJOR juggling.) That tells you that some banks feel the threat to their bottom line pretty strongly.

      The oil glut plus other pressures on banks (like the rapid increase in auto-loan defaults) means some banks will fail. So, the only reason you should care about the oil glut is that it is a major slam on the brakes for stocks and is a major broadside hit on some banks, which is part of the forming Epocalypse that I’ve been warning people about. You needn’t feel sympathy for banks or oil companies, but just know it is bringing some serious wreckage your way.


      • Auldenemy

        I am a massive fan of your articles. I don’t like to admit being a, ‘fan’ of anything cos it makes me sound like a Train Spotting geek!! I look out every day for a new article by you. Please will you write one soon? Best wishes from Scotland. PS our government just announced more deep cut backs, all of them to the poorest and disabled. Big banking gets to carry on looting Western economies and Big Corp. gets to carry on avoiding paying income tax. Ordinary folk like me are struggling more and more to make ends meet. The North Sea job losses continue (not just on the rigs but companies in Scotland who make equipment for the oil industry). Then there is the whole EU migrant mess with the tin pot dictator in Turkey demanding €6 billion in Euros or he will send more migrants to Europe. Plus he wants Visa free travel within the EU for all Turkish nationals (which means instant entry to Northern European countries to access welfare benefits). Erdogan is also demanding speeded up entry into the EU. You must be glad to live in Canada!

        • Thanks for saying so. I was away on vacation to Phoenix for several days last week, but I have been slowly working away at one this week, trying to think through carefully how far I wish to go with it, as I owe some response to my critics here. They’re all charged up and looking for something to discharge on, and things may appear to be in their favor. I hope to get it finished and published tonight. So, perhaps it will be ready for you in the morning.

          Your oil situation in the North Sea is shaping up just like ours here in the US, and immigration is becoming the hottest issue in presidential politics. So, we’re a mirror across the pond to what you are seeing in the UK, which is what I would expect to see in this global economic wreck as leaders seem hell-bent on empowering and helping the rich however they can, and one way to do that is with cheap migrant labor. It’s a way that they can do it, and look like it is because they have a heart.

          In some cases maybe they do have a heart and that is their motivation, but it is soft thinking because they are completely blind to the high levels of conflict they are needlessly creating and the overwhelming load they are placing on government systems and welfare that are already struggling as budgets top hundreds of billions of dollars in deficits every year to maintain the illusion that we can actually afford to give all this help to other countries. We are fooling ourselves.

          And maybe it is not all so naive as that. Beside the ones who are just looking to insource the outsourcing by bringing the outer source of cheap labor inside the country to take the remaining jobs that can’t be moved out … and beside the ones whose hearts are mushy with good ideas while they are blind to the conflict that is inevitable when you forcibly crash cultures together at an unprecedented rate … there are also many New-World-Order elitists who believe they have a superior vision of a globalized world that they wish to fashion.

          We are going to see a lot of change and a lot of conflict in this world because of blind do-gooders, global elitists, and greedy leaders of industry. It’s really gotten to be insane in just the last decade.


  • QEternity
  • jafo

    All I’ve seen through my lifetime is no matter what happens in the end some reason will be given that results in the customer paying more. With the government doing nothing because of increased tax revenue. In the end all you can count on is the little guy getting screwed and corporations, the elite, or the government getting massive revenue.

    • I live in an areas with many refineries, and gasoline still sells for more than $2/gallon when other areas of the country with more cars and fewer refineries are selling for around $1.50 per gallon. They used the excuse here a year ago that one refinery in California had a fire, so that explained why we have to pay more for gasoline. I thought, “Really? One refinery experiences partial damage on the west coast, which has numerous refineries; and, therefore, the cost of gasoline must remain up along the entire west coast FOR A YEAR?”



  • edwitness

    There is quite a bit of work going on in the refineries here in Billings,MT. Even
    though some have decided not to do some of the work they had planned due to money issues because of the low price of oil. Shutdowns are an annual thing for sure. We count on them every year.

    It would be something to see BP bought out. It is one of the largest refineries I have worked in at Bellingham,WA and seems to run the areas where it is located. They supply many jobs and taxes for the locals and the state.

    From the talk at the refineries they seem to know/believe that prices will continue to fall as well. And with the EPA shutting down coal it seems it will get worse for the good paying jobs that the oil industry and coal provide. God help us.

    • Welcome to the blog, Ed,

      One of our UK readers has pointed out to me that BP is struggling up in the British north. I suspect that the present oil price lows combined with their apparently self-insured costs for the horrible gulf oil spill could be bringing them to their knees.

      I have a relative who is foreman of one of the maintenance teams at the Bellingham (Ferndale, WA) BP, and I know they largely shut down when they go into their March maintenance mode. That HAS to speed up the backlog of oil supply when it happens all over the US.

      Interesting to get your inside perspective that the refineries, themselves, are saying they “know/believe” oil prices will continue to fall.


  • James Staten

    From a layman’s perspective, a very logical scenario. Thanks

  • Donald Sergent

    Dave, how much of this rally/short squeeze has been engineered to allow the banks/loan underwriters to unload their (assets) on the muppets? I know a few, and the degree of blindness to the staged narrative is frightening. “They must be smart, they’re on TV!”
    That they’re on TV to sell you their sponsor’s bill of goods is heresy–“They wouldn’t do that!”
    We the sheeple indeed

    • I don’t know, Donald. I have read a few people saying that market patterns show that it is a lot of people covering positions they’ve taken in the market. I guess we’ll find out by how it plays out. I think your idea that banks and others are working hard to convince others to buy assets they need to dump is quite possible. We saw that with Goldman Sachs in 2008.

      • Donald Sergent

        How about repo 105 and other short term tricks to buy time until the market recovers(or collapses outright). Dick Fuld was gonna “burn the shorts”- with an assist from the financial pundits. Short term thinking for a long term problem. Given the allusions to the Dallas Fed advising “flexibility on energy exposures”, how much (and for how long), can insolvency be concealed?
        I mean, everything-EVERYTHING, has been a charade intended to restore confidence for the last seven years. Including suspending FAS 157 in April 2009 after the panic following its Introduction in late 2007. Mark to model>Mark to market>mark to model/held to maturity. If Mark to market had been in place since oh, say 2002, could the securitization bubble have been blown as big?

        • It’s probably safe to assume, since the Fed is encouraging Texas banks not to foreclose on oil companies who are behind on their loan or bond payments that the problem must be huge. If it were a dozen companies going under, the Fed wouldn’t stand in the way of foreclosure. When they say, “Don’t foreclose; find a way to work it out” it’s because the Fed knows the number of foreclosures would rapidly become so great that the value of the assets placed on sale would plummet, making the bank losses greater. (As we saw with the housing crisis where many houses that were far in arrears on their payment, still have not completed the foreclosure process because foreclosing on everyone would have completely crashed the market, causing all banks to have to write their assets down to a very small amount.)