Sure, I bought a Delta Airlines bond with a 3.4% coupon for 93 cents on the dollar due in a year from now. Provided Delta doesn't go bankrupt in a year I will make 10%.
They have a pretty healthy balance sheet compared to their peers and I don't expect the government to let the sector fail in such a way that bondholders get wiped out.
The stock probably does have a bigger potential upside, but also a more probable (than the bond) downside. The stock could drop quite a bit while the bond remains solvent. Bankruptcy and declining stock are not (completely) correlated positions to take. It's always a risk trade off.
Even if they don't go bankrupt, the equity has a much higher risk. The gov't could take massive warrants or preferreds etc. in exchange for needed money. That sort of dilution can be profound. Look at a 10 year chart of AIG. Yahoo chart says all time high was 1971 (by eye), currently trading at 23. Of course the stock was never actually trading at almost 2000/share, that's just the dilution factored in.
Fidelity allows one to do so as well. The interface is a bit different from trading stocks (no intraday charts, additional fundamentals like YTM/YTW) but not exactly obscure. You search for a bond, type in a bid, quantity, and hit buy. The coupons show up in your account every few months.
What happens in the event of a default? I would have thought that your broker would zero it out, but I remember hearing about someone buying a worthless bond from a friend for like $1 once as a favor.
I've always wondered If I could just go out and buy like 10 mortgages or car loans in my area, and try to recover some of the money. I've heard that debt goes for pennies on the dollar, so I would think it would be possible to make a decent amount if you have the time.
I think in most states, if you are the original owner of the debt (i.e. you or your business lent the money), you can just go collect it.
But in a case where you're collecting a debt you did not originate, you'll need a debt collector's license in the state where you plan to operate. The license isn't hard to get, but typically there is a very large bond that needs to be posted.
And you're right: if you have the stomach for consumer debt collection and are good at being nice to people (being nice has a much higher success ratio than being a dick when trying to collect), and you're incredibly patient (the really cheap debt is almost uncollectable) it's basically printing money.
source: wife used to be a commercial debt/receivables collector and a long time ago I considered writing debt collection software.
Thanks for giving some insight into that process. I'd rather be patient and take on 'human' risk, which for some reason I feel more comfortable with.
I'm probably being overly idyllic, but I just imagine being friendly and reasonable with people and their situations might go a long way, especially reaffirming that you're not some massive bank that doesn't give a shit.
Honestly I think the toughest part is buying the debt.
I tried to do some research, but I'm even more confused how people do it. Do they just call up a bank and ask for some debt? Is there some online exchange for debt? California doesn't require a license or anything to buy debt, so in theory I should be able to, but I'm not sure exactly how to.
I did some quick research and it does look like it's a lot harder to buy debt these days than it used to be. Which is a good thing: there were/are a lot of shady characters involved.
Anyway, links:
"The story of how I came to own physical oil begins in late 2008, when fallout from the financial crisis spurred the crude market into severe contango—meaning the price of oil for future delivery was higher than the expected price of immediate “spot” delivery. While contango is the usual and persistent state of the oil futures curve, this particular "super" version helped create the perfect conditions for an almighty oil storage trade as the price of crude for future delivery vastly eclipsed the cost-of-carry and storage expenses of petroleum bought in the spot market."
This is exactly where we are now, only the prices are much lower and the demand even weaker?
I remember reading this the first time it came out. Only better the second time.
More or less, though it should be pointed out that the negative prices yesterday were for futures contracts that trade in 1000 barrel increments (roughly a railroad tank car) and not some tiny amount (like a blue barrel).
Back in school (around 2006) I asked the PR department of German BP for a small sample of crude oil, that I need for my final assignment. A few weeks later I've got large glass bottle (I think maybe over a liter) of crude oil. The package needed the signature of my mom because it was a dangerous goods transport. I think the shipment was for BP more expensive than the Russian oil itself...
have you considered some kind of presubmission check for this? even just to inform users without actually screening, and then auto appending previous discussions if submitted?
That would probably be helpful for informational use, but it seems to me like it would be frustrating to dump new comments into an old discussion. Maybe just a way to add a link to reference the prior discussion(s) like helpful people often do?
If you auto merged the comments from the last time, in theory they would quickly fall to the bottom because their time based value would be so much lower than the new stuff.
Maybe also disable replies to old comments and make them a different color?
To be fair, we could never figure out how to get this right on reddit either, but HN has a better comment sorting algorithm than reddit so it might actually work here.
what about automerging all comments +1 layer deeper with the bot comment (in the same form dang does it now) as the universal parent? it prevents the feature creep\bloat of adding a notification system, and maybe be backwards compatible with the web and mobile versions, and if people dont want it they can collapse the whole thread (or maybe it starts collapsed anyway)
I definitely wouldn't want old comments merged in, even at the bottom—it would get confusing! A story about pandemics, for instance, might have a very different meaning in 2019 vs 2020, and comments should be clearly split to reflect that.
Sorry for the delay - just seeing this now (ironically?)
HN threads are closed to new comments after 2 weeks, mostly as a way of preserving history. A forum discussion is most meaningful as a snapshot in time.
It would be weird if people could go back later to ancient threads and add comments based on information that wasn't available at the time. Actually, you can go back and look at very early threads, before this restriction was put in place, and it was already weird. Imagine what the original Dropbox Show HN would look like by now if we didn't restrict this.
All that said, I think you guys are on to something interesting with thoughts about how the software could provide better access to the history, beyond just posting links to past discussions.
Yes, I think we'll continue to avoid the notification system, not just because of flamewars but also because (relatedly) it's not so compatible with curiosity. Push notifications seem to jack up the nervous system in a way that's good for engagement but not necessarily for users—we all experience this elsewhere on the internet, and on HN we're in the blessed position of not needing to juice the numbers.
On the other hand, it can be hard to discover replies, and certainly new/interesting comments in large threads, when you want them. I'm currently working on a new-comment-highlighter (draws a colored bar to the left of comments since you last viewed the page) as one step toward helping with this. If anyone wants to help test this, email hn@ycombinator.com and I'll switch it on for you.
i take it by your edit you are concerned i was interpreting your "past posts" as some implication the OP should not have submitted - this is not the case.
honestly, i just feel bad for you. what appears to me to be a repetitive google + copy + paste on your part is anathema to me, and i was trying to help stamp out such work.
i think this has value, but im worried the amount of work involved
grows (at a minimum) greater-than-linearly as HN grows.
Well there’s the “past” button but you still have to click first. Maybe the “past” button could also list the number of previous submissions and the max number of comments of any submission (and/or max score)?
I actually love buying stuff which is not easily available, this has given me many ideas of starting new business of which a few are successful now.
Sometimes it's hard for someone within a system to conceive an idea which is obvious to the outsider and yes there will be many naysayers but if you know your idea can create value, you'll profit.
construction comes to mind, equipment, materials, things usually sold only to companies. that would be interesting...a small crane shipped to your cottage.
Considering that the front-month oil contracts went negative today (paid to buy a barrel of oil), I think more (well funded and adept) players will try to hastily arrange more storage facilities. There's just no place to put the stuff right now.
It's quite difficult to turn-off an active well. Deep-water wells are all but impossible to stop.
Actually, deep water wells are usually quite easy to shut in by design. They frequently need to be shut in due to hurricanes or infrastructure maintenance. You don't drill a $100 million deepwater well without all the bells and whistles.
Very cheap wells with low production (onshore, say ~10 barrel per day) are the ones that tend to be difficult to shut in, as they're not designed for easy temporary shut-ins.
That having been said, most of the "must produce" issues are contractual. There are plenty of contracts with production quotas/etc. Similarly, pipelines need a minimum volume to keep flowing, and once they're stopped, they can be difficult to start again (inspections/etc, as well as physically starting things flowing).
ALL wells, including the "very cheap wells" are easy to shut in, by design. It is an essential safety feature, mandated by all relevant codes, rules and regulations.
SOME wells can be a little difficult to restart after a shut-in. This includes, for example, offshore wells which extract waxy crude - the crude can simply solidify in the pipe if allowed to cool down to ambient temperature. See link below. This is usually not a big problem for a planned shutdown, as the facility will take measures to prevent such a situation (eg flush the pipes with diesel right after shutdown).
I suspect the problem might be more difficult with some pipelines, as these may be impractical to flush.
Yes, any well must be able to be shut in. I phrased that poorly. What I meant was that not all wells respond to a shut in in the same way. It's not uncommon for things to take months to recover to the same production levels after a shut in. (At least for conventional wells -- unconventionals are significantly different.)
(Major caveat here: I'm an exploration geologist who later went into remote sensing, so my knowledge of actual operations is pretty spotty. Feel free to ignore me on this, but I'm going to keep rambling anyway.)
I was referring to a lot of onshore wells in declining or very small conventional fields. In many cases, a shut in that lasts for more than a few weeks basically leads to a P&A, as production won't recover without a workover, and a workover isn't worth it. That's what I meant by "not designed for it" -- production is expected to be sub-par after a shut in and a workover was never in the plans. A shut in means a death sentence for some wells, so operators prefer to keep them trickling along when possible, as it leads to a higher EUR. (Also most of these are hooked up to stock tanks, not production gathering pipelines, so it's a bit of a different world.)
However, I'm extrapolating from the very little experience I've had with that. Literally one tiny onshore field in TN (yes, Tennessee) that I worked in/with 15 years ago a summer after undergrad (I was actually mostly collecting seismic with a tiny source and a short string of geophones from the back of a pickup truck, so not terribly closely related). I may very well be way off base.
That might have been true 20-30 years ago. Today, all of the easy oil has been tapped. They're going out farther, deeper, and under much high pressures than before. Oh, and they're less regulated.
> You don't drill a $100 million deepwater well without all the bells and whistles. <
You will if you can make a couple $B off it. It's a risk. The deep gulf has mudslides that take out rigs. It happened to Taylor Energy in 2004. All the tech in the world couldn't prevent that spill.
What does that have do the ability to shut in a well? A shut in isn't stopping something that's leaking or stopping a blowout. It's the ability to deliberately and temporarily stop production.
A loss of containment is very very very bad and a huge problem, but it's not related to a shut in.
I'm well aware of shallow hazards (e.g. mass wasting aka mudslides). I've mapped them in many areas. I'm well aware of the ongoing Taylor spill. I've actually worked with monitoring it using satellite imagery from the regulatory side. I've also worked with it from the oil industry side...
None of that is even remotely relevant here, though... I'm still very unclear how anything you mentioned relates to anything I said...
That having been said, if you think _anything_ around the oil industry isn't done with safety and environmental concerns first and foremost, you've _clearly_ never been anywhere around the industry. I'm dead serious.
What they do is really, really, really damned dangerous and it's fair to debate whether that risk is worth it at a societal level.
However, don't for a goddamn second think that these folks don't care or are sloppy. _Every_ meeting all the way to the top starts with a discussion about safety and possible environmental impacts. I really, really mean that... Every damn one. It's vastly more important than very literally anything else. The first decision is _always_ HSE, never money.
Yeah, things can go wrong in very bad ways. It's not because people don't care or are trying to make a buck at the expense of the environment. It's because they're working in a really difficult environment. Yes, deepwater horizon was preventable. Yes it was due to a poor well design. BP fucked up. That doesn't mean that the oil industry is some evil mustache twirling villain.
You want cheap vegetables, flights across the continent, and plastics? Right now, we have to have oil for that. It ain't ideal, but it's not because people are out there trying to make money off of environmental disasters.
If the disasters happen repeatedly despite safety and environmental concerns being the top priority, then clearly they are not.
Money comes first, safety second.
Obviously there will be a lot of effort spent on safety, because otherwise there would be even more accidents, and the whole company might be forced to shut down.
As it is, they have just found an equilibrium of safety and greed.
Businesses exist to make money. There is a constant demand for oil in the market; the world as we know it needs some level of oil to continue to function. If you can't ban the extraction oil, and you believe in the continued existence of private business, then profit and safety have to co-exist as priorities.
All industrial operations are inherently exercises in risk management. I think it's smug to phrase that as an "equilibrium of safety and greed" but frankly, yes, in order for things with risk to happen, you have to accept a level of risk, which will never ever be 0.
I work in another industry (not oil & gas) where safety is a consideration in every action we take, and it's not just lip-service. It's a down-to-our-bones mentality that we won't do anything unsafe, or allow anything unsafe to happen. Accidents still happen, and it's not because if avarice.
In many countries oil is taxed at over 70%. If oil prices grew by let's say 50% - these countries can lower the tax and consumers wouldn't even notice.
There's no excuse for ignoring external costs - these costs are real and paid by everybody while profits are gathered by only a few people.
It's deeply unethical but more importantly irrational - people profiting from the fossil fuels have no incentives to fix anything if they aren't forced to deal with the external costs.
Currently the system is - they get the profits and everybody pays for external costs. That makes alternatives to fossil fuels less attractive because you will pay "petrol tax" anyway in taxes spent on all the external costs, even if you don't buy any fossil fuels ever.
I fully expect some environmental accident b/c that's cheaper than paying people to take it. Also considering at least in the US, the EPA was told not to investigate things during the shut down.
The negative price has to do with the short delivery date, and the lack of storage at the (landlocked) delivery point. June 2020 WTI is still over $20/barrel.
If anyone had storage to bring online in the next few weeks, in Cushing, Oklahoma, they'd make a killing. At this point, they're going to need to ship it to a port, to get on a tanker.
Add blue collar people to the mix and it acts like a NIMBY rage multiplier. I'm picturing the movie plot now:
A bunch of gulf coast fisherman, effectively unemployed by Corona hatch a plan to make a buck by taking advantage of the negative price of oil futures. They pool their resources and somehow get their hands on a derelict Venezuelan tanker, cheap because of favorable exchange rates, in order to take delivery of some obscene amount of crude as part of a scheme to make money on futures. Being on a budget of course they crew the thing themselves, it's a ship after all, just a little bigger than the ones they usually handle. Things don't exactly go as planned when they travel to Venezuela to take possession of the ship. Their journey from there to the Port of Houston to pick up their cargo is mired by an incompetent coast guard, environmental activists and a vengeful ex-wife turned local politician.
Who does want a million barrels of crude in their back yard? As a very rough estimate, you'd have to stack them the better part of a mile high in mine.
I don’t think space is the issue. Shipping and safety (dealing with the one barrel that leaks) could easily eat $40/barrel if you’re not already set up for it.
If the oil tanker can hold 2,000,000 barrels at -$35/ barrel you are being paid $70 million to store the oil for a few months...
Of course, the next question is who pays for transport to/from the tanker, labor, dock fees, employees in ship (unless you can simply "park" it for a fee)
Yeah, I was wondering. I think if someone had the experience needed to put this together quickly it would likely be profitable.
It looks like most tankers are ~200,000 metric tons which at ~8 barrels per metric ton is roughly 1.6 million barrels. You also really only need to store it for a month, I think June futures are around $20 still, and so it's a diff of ~$60/barrel.
Better yet you can play hedging games with your oil. Sell a june delivery contract to lock in your profit now. If June prices collapse buy a contract to take delivery in June and sell one to deliver in July. You never have to get to Port until prices are high enough to be worth actually making a delivery, and you make money every month.
Details of the above are important to get just right. It works out if you get all the details right.
The point of futures is that I could sell my oil _today_ to be delivered in June for $20. Any change in June oil prices from that point onwards doesn’t matter once I’ve sold the contract.
If the price collapses for June you buy a june pick up contract, trade it for your June delivery contract, and sell a July delivery contract. So long as you have the oil and can deliver you can make money on it until prices return to where it doesn't work out at which time you deliver your oil.
While I realize you're referring to a functioning deep-water well, working as designed, I can't help but remember the complete mess from Deepwater Horizon. If it's difficult to stop a correctly functioning deep-water well, I have even more respect for that mess of a situation (and a bit more disdain for the practice in general):
There were still mechanical failures all over in safety devices. We're drilling much deeper than under higher pressures now than Deepwater Horizon.
To imply that deepwater oil production is safe, is crazy. Storms happen. Mudslides (underwater) happen. Pandemics happen. This is why majors contract out to the offshore drillers. They want nothing to do with it.
That's not exactly accurate. Transocean was the contract driller on deepwater horizon but BP still took the brunt of the liability and PR backlash. The contract structure actually hasn't changed much in the past 20 years.
When the price went negative, it made me wonder if I could legally take delivery of barrels of oil in my back yard.
I'd like to assume there are some EPA rules that preclude one from storing barrels of oil just anywhere, but at the same time, the EPA is currently not enforcing any regulations.
I also wondered about delivery on these contracts. Does that include delivery to any address I specify? Can I get paid $3000 to take 100 barrels and ask them to drop it off at my house?
And then what? After the price recovers and I want to sell the barrels, will someone come get them from house?
> When the price went negative, it made me wonder if I could legally take delivery of barrels of oil in my back yard.
Typically, the exchange contract is quite specific about where and how delivery can be made, and “in barrels shipped to your backyard” isn't an option. See, e.g., the delivery procedures here: https://www.cmegroup.com/trading/energy/crude-oil/light-swee...
Also, “barrels” are just a (traditional for the commodity) unit of measure (42 US gallons/35 imperial gallons), not actual containers used for delivery.
Even if the oil came in physical barrels, the contract is for 1000 barrels of oil, so you would need quite a lot of space in your back yard. That quantity is more like a railroad car full of oil. You might be able to arrange for the oil to be put in a tank car and delivered to a train track somewhere if you wanted to try this, though I suspect you would not make nearly as much money in the process as you think.
The reason wells are hard to shut in has nothing to do with the actual turning off the tap. All wells are designed to turned off with BOPs (blow out preventers, etc). The problem is that if you shut in a well for an extended period of time, you damage the reservoir and will have to do remedial work to get it back to its production rate (if ever). This is why producers are not keen to shut down production. They have to weigh the short term cost of the current prices against the cost of future losses over the lifetime of the reservoir
Not exactly. If you are not sure the glut will last for a while and then disappear you don't invest. There is a ton of money to make but only if you get the details right, if any is wrong there is a ton of money to lose.
What if you don't know if it is 2 months or 2 years? There are great investments either way, but some investments only work with one and lose badly in the other. Thus if you are not sure you can't invest.
Paid to take on the futures contract obligation. If you happened to need or want physical oil delivered in Oklahoma a month from today, you got a good deal as futures traders unloaded their contracts.
Contango means that futures prices further out are higher than futures prices in the nearer term, and is normal for oil futures; what's notable is the extreme slope of the futures curve we're seeing.
That's what the strategic petroleum reserve in Louisiana is. They filled massive salt domes with crude oil. The salt keeps away bacteria that can foul the oil.
Well, that's a little more involved than a reservoir, in fairness. Makes me wonder though if we might see something like this pop up in the private sector in case this happens again. Even a tens of millions of dollar investment in storage would look reasonable alongside the potential profit having millions of barrels of storage would bring right now.
Amongst others. It's not enough to just dig a hole in the ground, you have to make sure it doesn't seep into the ground as well. In addition, you have the always present risk of fire...
Unfortunately, right now it seems that there is incentive out there for oil to "go missing" for a profit -- presumably at the cost of the environment. I'm curious if anyone is thinking about trying to replace their fracking fluid with oil for a while...
Why don't the producers turn down the output? Does it cost more money to produce less? Is it mutually assured destruction? A game of chicken? This is so weird.
I heard on NPR yesterday that oil producers are concerned that output will be dampened by "turning down the output" because it can make flow rates lower when they reopen.
I mean for a "personal" amount of oil, I suppose a backhoe would do. But, to change the front month price, you have to actually store a significant fraction of world oil production (1-2%?). I don't think a backhoe is going to cut it. Then you have to somehow make sure it doesn't plume into the ground water, which is impossible absent very specific geological features or somehow lining the world's largest open pit mine with an impermeable barrier.
I am surprised there hasn’t been an “accidental” pipeline leak around Cushing. Who could have known that leaving a valve open could dump so much oil onto the ground.
Tldr- commodities trader accidentally specified physical delivery for several thousand tons of coal; very surprised when the barges show up at their waterfront office.
I think the story is fiction. I don't think commodities are sent wherever your office is. Isn't the location of delivery set as a part of the futures contract?
Thedailywtf stories are generally some mix of fiction and fact. They take a presumably first-hand account from an insider and change a bunch of details to anonymize it and enhance it for dramatic effect.
I'd guess, for this particular story, that at least the misparsing of XML for a futures contract actually happened, and maybe that some producer consequently had to ask about the feasibility of delivering to a corporate office that happened to be in former docklands. It's entirely possible that the commodity involved was not coal, and it's extremely unlikely that a guy showed up one day at the front desk with a clipboard and barges outside.
Yes (e.g., if you buy CL futures, delivery is in Oklahoma).
QL coal doesn't trade anymore (all the active coal futures I can find now are cash-settled) but delivery seems to have historically been at the discretion of the parties, so the story is at least plausible.
Everything I’ve read seems to say it’s very, very difficult to accidentally take delivery, but it’s not quite impossible.
In related news, there is a Planet Money Podcast (episode called the Eddie Murphy Rule) where they interview the trader who took possession of a bunch of cattle by mistake IIRC.
Is there an open-source library that does this? I know readability existed at some point but now its no more. Using this, I'd love to build a self-hosted version of Pocket that supports full-text search etc.
They're super-blurry without javascript, which probably means they're very small, enlarged by the IMG tag dimensions, and loaded in full res by JS. As an encouragement to use JS, I guess.
Bloomberg seems to always republish their articles on sites like MSN and Yahoo. If you search the headline you can usually find a non-paywalled article.
I don't think there's any opportunity cost to Bloomberg here, nobody freeloading on this site would otherwise be buying a subscription, I shouldn't have thought.
