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Thalassa Energy Buys Property Reit

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This looks odd, as Thalassa Energy (webpage http://thalassaholdingsltd.com/ ) is er... an energy company (look there's a big oil rig in the sea), and it is building a stake in a property company. LSR (webpage http://www.localshoppingreit.co.uk/ )

Here's the news on the sizeable transaction http://www.digitallook.com/news/aim-bulletin/thalassa-ups-stake-in-local-shopping-reit--1702064.html

The company said it acquired just over 10.4m shares in LSR on Thursday, bringing its total holding to just under 12.9m shares or a 15.6% interest......

....Thalassa chairman Duncan Soukup said: “The board of Thalassa is pleased to announce the acquisition of a material holding in LSR at what the board consider a good entry point.".....

So the money is in property, not energy?

LSR shares are around 30p. We'll see.

I dug up an old story about a takeover from involving Duncan in 2004

http://www.telegraph.co.uk/finance/2883144/Business-profile-I-hate-it-when-they-call-me-a-vulture.html

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Or a Berkshire Hathaway style value-based conglomerate?

Edit: scrub that, I suspect they've been listening to Andy Haldane.

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Additional announcement, that THAL has bought another £2m odd shares in LSR

http://uk.advfn.com/stock-market/london/thalassa-di-THAL/share-news/Thalassa-Holdings-Limited-Acquisition-of-Shares-in/72404390

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The increased volume confirms the purchases recently. LSR has dropped with market weakness today, some 4-5%, but it might be a shake out for more stock for THAL? I probably wouldn't be interested in LSR unless other stocks such as BLND, and LAND are showing confirming strength. Wake me up when this clears 50p before 2017.

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This out today

http://uk.advfn.com/stock-market/london/thalassa-di-THAL/share-news/Thalassa-Holdings-Limited-Interim-Results/72414988

Chairman's Statement

"Just when you thought it was safe to go back into the water..." Jaws 2, Peter Benchley

Like most sequels the Original is usually always better or in the case of Jaws, scarier; possibly because in the original movie, one didn't expect a Great White to come flying out of the water and into ones face. In the sequel Jaws 2, the entire movie was toned down as the original barely escaped an R rating. Nonetheless, in the tamed down sequel (less blood) the shark looked more vicious and still hunted and feasted on humans...but the audience wasn't scared! The movie simply lacked "Hitchcockian" tension or suspense!

Following the 2008 banking crisis, by comparison, the sequel is veritably boring or Jaws 2esque. The collapse in oil prices has, as I detail below, come close to equalling the losses incurred in the mortgage backed security markets which nearly brought the banking and insurance industries to their knees. Yet because far fewer individuals are affected, it would appear that far fewer care!

And yet I would argue that we should be much more fearful of current economic and financial market conditions than those that existed pre the 2008 banking crisis. Why? Because of "complacency"! In the aftermath of 2008 central banks around the World had ample ammunition, with which they flooded the financial markets, in order to avert a liquidity crisis (they feared that lending would dry up) and in order to stimulate Global economic activity and avoid a repeat of the Great Depression that followed the 1929

Stock market collapse.

It is now quite clear that central banks are virtually out of ammunition (not to mention ideas). The ECB's wonderfully named "Outright Monetary Transactions" policy or unlimited bond purchase program introduced in 2012 has now ballooned into an EUR80bn a month lottery game that has so far failed but which may now be followed by the even more bizarre prospect of "Helicopter Money" which could involve direct payments to individuals by central banks! Recently, ECB Board member Yves Mersch dismissed "extreme measures," which he warned would have unacceptable side effects and undermine trust in the single currency. "We cannot fulfil our mandate with mathematical equations, but only with instruments that maintain trust in the currency," Mr. Mersch said. Clearly, monetary policy alone is not the panacea to slow/no growth, no inflation environment that the Western World currently faces.

Pumping unlimited amounts of cash into the system may sound quite brilliant, but like most, if not every cunning plan, it is flawed and ultimately, in my opinion doomed to partial, if not complete failure. Somebody should have told the central bankers that giving commercial and investment bankers and hedge fund managers access to virtually unlimited free money is like giving drugs to drug addicts; they are not going to change their bad habits and lend or invest the money wisely!

In America the Fed Funds rate currently sits at 0.5%, in Europe the ECB has set its Main Refinancing Operations rate (MRO) at 0%, whilst in Japan the Japanese Prime Lending Rate is at -0.75%. And on 4 August 2016 the Bank of England cut the Bank Rate to 0.25%!

So given the lowest interest rate environment on record, why isn't global economic growth roaring? Probably because instead of investing in growth, banks are on the one

hand in relatively bad shape because of non-performing loans so they are "hoarding". And probably because the companies they are lending to are becoming more efficient and investing in productivity, which, rather than creating jobs, results in job losses. A great case in point is Amazon; highly efficient in its delivery of goods and services, with a recent market cap of $366.9 billion run by a nice enough chap, Jeff Bezos, now the richest man in America, but a company, which is not only transforming an industry but replacing menial labour with less of the same and lots more automation. Don't get me wrong, I am not suggesting that Amazon is doing anything wrong, what I am suggesting is that the people who are being displaced by technological progress need to be retrained or they will land permanently on the pile of unemployed that is slowing economic recovery and future growth. 40%+ youth unemployment in the "PIGS" is simply an accident waiting to happen.

Blame the current phase of the recurring financial crisis, as the IMF and EU parliamentarians do, on Brexit if you will, but the reality, in my opinion, is far more sinister.

Political leaders are the first to take credit for success but are apparently never responsible for failure!

As Tacitius originally wrote,

Inquissima haec bellorum condicio est: prospera omnes sibi indicant, aduersa uni imputantur. (Tacitus, Agricola 27:1 (written 98AD) [1])

"Success has many fathers, failure is an orphan".

One could be forgiven in thinking that Tacitius, in his book Agricola, was writing about a farmer or farming (Agriculture). Nothing could be further from the truth, Tacitus was an historian and Agricola is the story of his father in law, Gnaeus Julius Agricola, an eminent Roman General and Governor of Britain from AD 77/78 to 83/84...and is possibly one of Boris Johnson's favourite reads, or should be!

Tacitus favourably contrasts the liberty of the native Britons to the corruption and tyranny of the (Roman) Empire; the book also contains eloquent and forceful polemics against the rapacity and greed of Rome (or was he writing about Brussels, Westminster or Washington?).

For Tacitus, Agricola served as an example of how, even under despotism, it was possible to behave correctly, avoiding the opposite extremes of servility and useless opposition.

My point, quite simply is that central bankers, ably supported by the Governments to whom they report, have sold the family silver, given the money to the same people (numpties?) who caused the initial problem and told them to have another go!

The 2008 Banking crisis bailout is estimated to have cost the US alone, $7.7 trillion!

"After the original $700 billion bailout, the ongoing bailout was kept very secret because Chairman Ben Bernanke, argued that revealing borrower details would create a stigma - investors and counterparties would shun firms that used the central bank as lender of last resort. In fact, $7.7 trillion of the secret emergency lending was only disclosed to the public after Congress forced a one-time audit of the Federal Reserve in November of 2011. After the audit the public found out the bailout was in trillions not billions; and that there were no requirements attached to the bailout money - the banks could use it for any purpose." Mike Collins, Forbes.

You would have thought that these "clowns" would have learnt something, anything from the near terminal meltdown? Not a chance.

6 years after the Banking crisis, the fragility of the World's financial system is again being laid bare.

Oil prices have collapsed, recovered and are again falling and, whether because of Brexit or simply because of a complete inability to address Italy's debt problem, the Italian banking system is at risk of imploding and eviscerating thousands of individual investors because neither the IMF nor the ECB or any other major institution is willing to share the burden of losses on their loans. Monte Paschi, the oldest bank in the World, has already raised $8 billion in capital over the past two years, all of which has been vaporized and is now seeking a further $5 billion to stave off bankruptcy. In a last minute deal 5 Banks (no not serious investors!) have agreed to underwrite a rescue issue. In other words these smart lads and ladettes have agreed to invest their "shareholders money" (NOT their own) in the biggest basket case in Europe in the event that they are unable to place shares with other misguided miscreants. The icing on the cake is even tastier, the transaction will no doubt generate generous fees (millions of $!), which will flow through the underwriters' P&Ls and boost earnings to help pay bonuses. Wahoo! Party time! In the meantime, the "investment" (punt?) will disappear into the balance sheets of the underwriting banks only to probably reappear at some point in the future in the Notes to the accounts as a write off!

The last time this disappearing act was performed with such aplomb was shortly before WEST LB Panmure Gordon went up in flames. I am sure that some may disagree with my understanding of the facts. However, the story goes something like this, ambitious banker joins small time player (Panmure) owned by Ignorant Parent Company ("IPC") (West LB). Small time player muscles its way into the big leagues by using IPC's pristine and very healthy balance sheet to underwrite (dump?) overpriced structured products (loans and convertible loans). IPC's balance sheet gets destroyed when in 2000 the market crashes and IPC's investments turn to dust. The really great (actually not so great!) part of the story is that Panmure generated millions of $ of virtual profits and paid out millions of EUR/GBP/$ in bonuses, which their executives kept whilst in 2002 West LB wrote off $2bn in bad debts.

Sadly, the board and management learned nothing from this near death experience and rolled the dice again but with disastrous success. When in 2008 the mortgage backed securities market in the US collapsed, West LB sustained such enormous losses that the Bank was ultimately wound up. In the ten years prior to its demise West LB generated EUR1.13bn in profits (in 3 of those years) and EUR7.21bn in losses (during the other 7 years)!

http://www.bloomberg.com/news/articles/2012-06-29/westlb-s-fall-from-grace-is-lesson-in-investment-bank-hazards

Which brings me back to oil...

All told, 69 North American oil and gas producers with $34.3 billion in cumulative secured and unsecured debt had gone under as of 30 June 2016 when I started writing...

Stop the presses! As at the end of July 2016, 90 companies involving $66.5 billion in secured and unsecured debt have filed for bankruptcy. Worse, since share prices peaked in 2014, the oil bust has wiped out about $1 trillion in energy company equity, with the Dow Jones U.S. Oil & Gas Index off 40%.

http://www.haynesboone.com//media/files/attorney%20publications/2016/energy_bankruptcy_monitor/oil_patch_bankruptcy_20160106.ashx

There's more to come. "Despite the modest recovery in energy prices, all indications suggest many more producer bankruptcy filings will occur during 2016," writes Haynes & Boone. According to Deloitte, about a third of global oil and gas companies, or about 175 of them, are at risk of insolvency. Bernstein Research estimates that by 2019 we'll see more than $70 billion in defaults amid more than $400 billion in high-yield energy debt - that would indicate that we're only halfway through the bankruptcies. (Christopher Helman, Forbes)

OK this man is a HPCer?!

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