(Bull) Market 2021

[ducati916]

A number of gold charts have appeared:

@rederob

Still bullish.

@Cam019

Bearish.

I am also bearish currently. First up just a straight 10yr chart. Just looks weak.

The Miners: also looking weak. At one point we did extend through the resistance, but it failed.

As against interest rates. 16yrs worth of chart. Gold has always inversely correlated against yield. Yield is rising. You would expect gold to fall unless real yields were still negative as against PPI rather than CPI. The question is where do yields fail, if/when the Fed. steps in front of them. At 0.10 level or 0.261 level?

Just run too far too fast.

This chart also looks bearish. The last 10yrs.

As against debts:

I think gold grinds lower most of the year, fighting all the way as true believers buy the multitude of dips on the way down. That can reverse, but it will take (a) a surge in PPI inflation and (b) Fed. capping rates. Can that happen? Of course, I even have it as probable. So a short term bear, long term bull.

jog on
duc

 

[Dona Ferentes]

Executive Summary
The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.

These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part. Every career incentive in the industry and every fault of individual human psychology will work toward sucking investors in.

But this bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios. Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives. Speaking as an old student and historian of markets, it is intellectually exciting and terrifying at the same time. It is a privilege to ride through a market like this one more time.

...
All bubbles end with near universal acceptance that the current one will not end yet…because. Because in 1929 the economy had clicked into “a permanently high plateau”; because Greenspan’s Fed in 2000 was predicting an enduring improvement in productivity and was pledging its loyalty (or moral hazard) to the stock market; because Bernanke believed in 2006 that “U.S. house prices merely reflect a strong U.S. economy” as he perpetuated the moral hazard: if you win you’re on your own, but if you lose you can count on our support. Yellen, and now Powell, maintained this approach. All three of Powell’s predecessors claimed that the asset prices they helped inflate in turn aided the economy through the wealth effect. Which effect we all admit is real. But all three avoided claiming credit for the ensuing market breaks that inevitably followed: the equity bust of 2000 and the housing bust of 2008, each replete with the accompanying anti-wealth effect that came when we least needed it, exaggerating the already guaranteed weakness in the economy. This game surely is the ultimate deal with the devil.

Now once again the high prices this time will hold because…interest rates will be kept around nil forever, in the ultimate statement of moral hazard – the asymmetrical market risk we have come to know and depend on. The mantra of late 2020 was that engineered low rates can prevent a decline in asset prices. Forever! But of course, it was a fallacy in 2000 and it is a fallacy now. In the end, moral hazard did not stop the Tech bubble decline, with the NASDAQ falling 82%. Yes, 82%! Nor, in 2008, did it stop U.S. housing prices declining all the way back to trend and below – which in turn guaranteed first, a shocking loss of over eight trillion dollars of perceived value in housing; second, an ensuing weakness in the economy; and third, a broad rise in risk premia and a broad decline in global asset prices (see Exhibit 1). All the promises were in the end worth nothing, except for one; the Fed did what it could to pick up the pieces and help the markets get into stride for the next round of enhanced prices and ensuing decline. And here we are again, waiting for the last dance and, eventually, for the music to stop

Either way, the market is now checking off all the touchy-feely characteristics of a major bubble. The most impressive features are the intensity and enthusiasm of bulls, the breadth of coverage of stocks and the market, and, above all, the rising hostility toward bears. In 1929, to be a bear was to risk physical attack and guarantee character assassination. For us, 1999 was the only experience we have had of clients reacting as if we were deliberately and maliciously depriving them of gains. In comparison, 2008 was nothing. But in the last few months the hostile tone has been rapidly ratcheting up. The irony for bears though is that it’s exactly what we want to hear. It’s a classic precursor of the ultimate break; together with stocks rising, not for their fundamentals, but simply because they are rising.

....

What to Do?
As often happens at bubbly peaks like 1929, 2000, and the Nifty Fifty of 1972 (a second-tier bubble in the company of champions), today’s market features extreme disparities in value by asset class, sector, and company. Those at the very cheap end include traditional value stocks all over the world, relative to growth stocks. Value stocks have had their worst-ever relative decade ending December 2019, followed by the worst-ever year in 2020, with spreads between Growth and Value performance averaging between 20 and 30 percentage points for the single year! Similarly, Emerging Market equities are at 1 of their 3, more or less co-equal, relative lows against the U.S. of the last 50 years. Not surprisingly, we believe it is in the overlap of these two ideas, Value and Emerging, that your relative bets should go, along with the greatest avoidance of U.S. Growth stocks that your career and business risk will allow. Good luck!

So, if he is normally 2yrs too early, where exactly do we sit, best guess/estii?

glad to see @finicky took a read, liked., Jeremy Grantham writes well, & from experience. Of course there is a huge difference in approach running billions compared to decisions on the individual level. It's all about preservation of capital whether it's a mill or two, or just starting out with a small kitty.

Waiting for the Last Dance

The long bull market since 2009 has matured into an epic bubble, featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior.

www.gmo.com

Where do we sit? Better to be six months early than six minutes late?? It is a bubble.

 

[ducati916]

glad to see @finicky took a read, liked., Jeremy Grantham writes well, & from experience. Of course there is a huge difference in approach running billions compared to decisions on the individual level. It's all about preservation of capital whether it's a mill or two, or just starting out with a small kitty.

Waiting for the Last Dance

The long bull market since 2009 has matured into an epic bubble, featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior.

www.gmo.com

Where do we sit? Better to be six months early than six minutes late?? It is a bubble.

The purpose of this thread is to demonstrate that trading a market, whether it is a bubble or not, tops and bottoms can be successfully traded in real time. In respect to tops, that is whether it is a 1987/2020 style fast crash or a 2000 slow burn. The slow burn is a much harder market to trade.

Fundamentally I agree, the markets are grossly overvalued currently. The problem is if they continue to rise for X years and increase that overvaluation: do we (a) get out now and lose that additional return or (b) stay the course looking for the turn?

Hence the (over) reliance on technicals on this forum. Most will believe that the technicals will provide a signal, easily recognisable, at the top and the turning point. The technicals will provide a signal. It is not always easily recognised. This is in part due to: (a) conditioning to buy the dip, (b) individual psychological issues, (c) faulty mechanical systems/tech. analysis methods, (d) over-reliance on the financial press, (e) over-reliance on guru advice, (f) add your own.

An example of a Psychological issue: there is a tremendous tension between maintaining the (a) flexibility of an open mind and being willing to flippe-floppe on a moment's notice and (b) standing your ground because you 'know' you are right. At various points in an individual's market experience, both positions can make or lose him significant amounts of money. Both are important, both are required to succeed. How to reconcile this tension?

Another example of one of the identified issues that recurred numerous times via @over9k was an attempt to trade the 'news'. If you are a 'technical' trader you simply ignore the news. It is 100% irrelevant. You trade your chart. If you are a fundamentals chap, then the news is a factor that you must assimilate into your analysis and position. You should not attempt to mix & match (for I hope obvious reasons) unless you are using it in a quite specific manner.

This thread will continue to the end of the bull, whenever that may be and the proof will be in the pudding (or not as the case may be).

jog on
duc

 

[ducati916]

Some history, which rhymes:

These are the original SPACS.

SPACS are a part of the current overvaluation in the current market:

Some $80B in 2020.

Were they profitable?

No. This certainly echos the dot.com market where profits were non-existent.

Next week's IPOs. Look at the # of SPACS in there.

By all accounts, one to list, or just recently listed has the Shaq Attack as its sponsor. WTF does he know about markets?

We have therefore an interesting psychology (again) at work. We have, thanks to social media, a really significant FOMO mindset. This again was a hallmark of the dot.com market: I remember talking to colleagues about work and the conversation would almost inevitably move to stocks, particularly NASDAQ stocks. CSCO was a biggie. This phenom. is x10, x100 due to social media. Robinhood is one of the latest manifestations of the older style stock bulletin boards (which of course ASF is one) where all manner of nefarious schemes play out.

Obviously it will end badly. It always does. The trick is to stay to the end of the party, just before the lights come on and then leave.

jog on
duc

 

[ducati916]

There is really only 1 story today: Cryptos.

Down 25% in 2 sessions. This will really test the staying power of even the religious. The smaller speculators will be sitting on massive losses of either capital or open profits. It will remain to be seen if those that still have open profits close out or hang on.

Earnings season about to begin, which will bring increased vol. back into stocks. Stocks are overbought and vulnerable as evidenced below: the importance of the chart is that it (again) illustrates the (a) divergence in advancing/declining stocks at all time highs and (b) just how far above the median line (in blue) that we are.

Those that disappoint, either with earnings or forward guidance, probably will be sold. This could push vol. higher across the board.

Interest rates continue to rise.

I see a pause at 1.3%. We are at 1.12%. Still a little way to go. If we overshoot, that will be a concern for stocks, gold and possibly even BTC.

Stocks and Commodities down slightly:

Mr flippe-floppe-flye is willing to step into the crypto market as the buyer of last resort:

jog on
duc

 

[ducati916]

There are contradicting forces at work re. inflation/disinflation/deflation. The arguments each have their own supporters. The eventual outcome could/will have a significant influence on market prices across all asset classes.

The deflation argument in 1 sentence: Corporate debt is at +/- $12T. Rising interest rates place that debt at risk of default. A default across a broad swathe of borrowers is deflationary.

Well on the way to 1.3%. I have it pausing at 1.3%. What if it overshoots or just continues higher? The Fed. at some point could/would 'probably' cap rates. What if they don't?

Inflation is still picking up. Not an issue yet, but it is probably driving the rise in rates.

I have (via Gold Producers) gold still weak and getting weaker:

Vol. in the stock market rising:

I have added the 'new' trend line, but I'm not 100% convinced it is correctly placed. It is therefore a guideline currently.

The war with China (which was 1 of the major disinflationary forces) is/will heat up, below China's stated policy:

In the news today, WMT announces it is moving into FinTech, it was an agent of disinflation:

Biden & Democrats close to taking over:

Carter was POTUS during the 1970's and Stagflation.

Mr flippe-floppe-flye:

jog on
duc

 

[ducati916]

The market moving into 2021 is essentially 1 question: Inflation or Deflation? Fed. policy is pro-inflation. If there were to be a widespread deflation (bankruptcy on an epic scale and a significant % of that $12T Corporate debt default) the Fed. would likely (try) to step in front of that tidal wave. The result would be potentially an out of control inflation.

This is my 'inflation' chart. However Ag. is also on the move see @Warr87 and his Ag. based trades. The evidence is starting to build a reasonably strong case for inflation taking hold and building through the year.

That will see interest rates rise. Until the Fed. caps them. The Fed. have already flagged that they will move to curve control. Then the inflation trade is on. PMs will explode, commodities will explode and currencies will gyrate wildly with increased vol. The interesting question is what will the US$ do? Common wisdom would dictate lower and probably significantly so. I'm not so sure on that one.

The question is: at what level of interest rate does the Fed. cap? Lots of people are guessing. The Fed. has not (yet) indicated. (Next chart down) looking at rates, we know where the 'Taper Tantrum' took place, so lower than that, which means that 3% is about our ceiling.

The 10yr will move to 1.3%. It may well overshoot to the upside. If it does not stop at 3% it will be stopped by the Fed.. However, by that point, the SPY will have already broken and be in a funk.

For inflation types of trades see flippe-floppe-flye below.

The US will be retiring energy generation:

What will replace that lost generation? The plan seems to be Green. What happens when there is no wind/sun/etc?

More news:

Oil prices shot up to a 10-month high, posting further gains in the wake of the OPEC+ cuts, and edged a bit higher by a weaker dollar. Some analysts are starting to argue that the rally is getting a little overdone. WTI is above the 200-week moving average, and “it may soon top out,” according to Commerzbank.

LNG prices skyrocket. JKM prices for LNG in northeast Asia are shooting through the roof. Cold weather and higher demand in China and Asia have JKM prices for February delivery well above $21/MMBtu, while individual spot cargoes have traded in the high $30s/MMBtu, breaking all-time record highs. The cost to rent LNG tankers is also breaking records.

OPEC cuts could help shale. The jump in crude oil prices could finally bring positive cash flow to much of the U.S. shale industry, according to Rystad Energy. The firm says cash flow could increase by 32% this year.

OPEC+ compliance slips to just 75%. OPEC+ group’s compliance with the oil production cuts fell to 75% in December 2020—one of the lowest levels since the pact was enacted in May 2020, tanker tracking firm Petro-Logistics said on Tuesday.

Kansas City Fed: shale needs $56 WTI. According to the latest survey from the Kansas City Federal Reserve, oil and gas firms reported that oil prices needed to be on average $56 per barrel for a substantial increase in drilling to occur, and natural gas prices needed to be $3.28 per Btu. The industry’s expectations for future activity improved.

Shell to cut 300 jobs in North Sea. Royal Dutch Shell (NYSE: RDS.A) said it will eliminate 300 jobs in the North Sea over the next two years.

Fitch warns of oil and gas defaults. Fitch Ratings warned about the continued threat of defaults in a recent update, noting the oil and gas industry would this year again be the one with the most defaults.

Renewables to dominate new power installations. Renewable energy, mostly solar and wind, are set to account for more than two-thirds of the new electricity generation capacity that the United States will install this year, according to the EIA. A total of 39.7 GW of new electricity generating capacity is expected to start commercial operation in 2021, with solar accounting for 39% and wind accounting for 31%.

European freeze rattles energy. A polar vortex is bringing Arctic weather across much of Europe, blanketing Spain in snow and sending temperatures to unusually low levels. That is adding more upward pressure to gas markets.

Wind becomes top power supplier in Texas. “Wind power surged past coal in Texas’ electricity mix for the first time in 2020, the latest sign of renewable energy’s rising prominence in America’s fossil fuel heartland,” the Financial Times wrote.

Faraday in SPAC to go public. Faraday & Future Inc., an electric-vehicle startup, is in talks to go public through a merger with Property Solutions Acquisition Corp., a special purpose acquisition company, or SPAC. The entity hopes to raise $400 million, and the combined entity hopes to be worth around $3 billion.

Drillers stockpile permits ahead of Biden admin. Energy companies have amassed a backlog of drilling permits ahead of the incoming Biden administration in case there are new restrictions on federal lands.

GM changes logo to promote EVs. GM (NYSE: GM) changed its logo for the first time in 56 years, and the new image noticeably looks like a plug, in an effort to promote EVs.

Chinese rival to Tesla. Chinese automaker Nio Inc. unveiled its first all-electric sedan in a bid to compete with Tesla (NASDAQ: TSLA).

Supreme Court to look at biofuels waivers. The Supreme Court will review the ability of oil refineries to win exemptions from federal biofuel-blending quotas, the latest twist in the ongoing battle between the ethanol and oil refining industries.

HSBC under pressure to cut fossil fuel investments. Shareholders of HSBC have filed a resolution urging the bank to cut its support for oil, gas and coal.

Total SA to add renewables investments. Total (NYSE: TOT) will add renewable energy investments in 2021, according to CEO Patrick Pouyanne. The company aims to increase holdings to 35 GW by 2025, up from 9 GW today.

Saudi Arabia launches NEOM. Saudi crown prince Mohammed bin Salman launched plans to build NEOM, a zero-carbon city.

$1 billion inflows to renewable energy after Dem sweep. After Democrats took control of the Senate, $1 billion flowed into renewable energy exchange-traded funds.

EIA natural gas reserves fell by 2%. Natural gas reserves in the United States fell by 2 percent in 2019 due to low prices, the Energy Information Administration said in an update on the country’s oil and gas reserves.

Mr flippe-floppe-flye:

jog on
duc

 

[Smurf1976]

More news

I won't derail the thread by commenting on the details but I can't help but notice that the overwhelmingly dominant theme there is energy both renewable and non-renewable.

It's a sector where investment opportunities exist certainly, just be careful to sort the politics and hype from the facts since the energy sector does attract plenty of the former and it's a field with considerable technical complexity and a great deal of mainstream public misunderstanding as to how things actually work in a technical (engineering) sense and what has value financially and what doesn't.

It's a sector where the detail of what a company actually does is critical so far as investment implications are concerned.

 

[qldfrog]

Mr Duc,
I would like to bring the US dollar index dxy to your attention, especially the long term chart: 10y+
You will quickly notice that it has just reached the bottom of its range and has started its up move.this could be of importance for us, as foreigners, and as an extra cause of inflation

 

[qldfrog]

Mr Duc,
I would like to bring the US dollar index dxy to your attention, especially the long term chart: 10y+
You will quickly notice that it has just reached the bottom of its range and has started its up move.this could be of importance for us, as foreigners, and as an extra cause of inflation

Sorry for absence of chart.can not do right on the phone..

 

[ducati916]

Mr Duc,
I would like to bring the US dollar index dxy to your attention, especially the long term chart: 10y+
You will quickly notice that it has just reached the bottom of its range and has started its up move.this could be of importance for us, as foreigners, and as an extra cause of inflation

USD. The question is (as it sits on a pretty major support area): does it display strength or weakness?

Of course timeframe will be very important here. First up:

Interest rates: rising. This (potentially means) holders of Treasuries are sellers to lock in capital gains that they (may) have and with rising rates, why not buy at a more attractive yield, which then allows for (further) capital appreciation if/when the Fed. caps rates.

The second, really macro view is also lower. This is because the US petro-dollar monopoly is being challenged:

Both China & Russia want to break the monopoly that the US has held since the deal with the Arabs in the early 1970's/late 1960's, which, essentially provided the US (along with Bretton Woods in 1944) the Reserve Currency status that has allowed the US to become one of, if not the largest debtor nations in history.

The deal, essentially forced all oil consuming nations (which is everyone) to hold USD to purchase oil. This of course placed a permanent bid under the USD. As the US rotated from a primary manufacturing nation to a services and tech. economy, it allowed the US to finance these trade deficits as manufacturers (China) recycled USD received back into Treasuries and other assets (stocks), financing the balance of trade deficits, in large part to peg the Yuan to the USD.

This is changing:

The counter-argument is this: if the USD is to 'collapse'; where does that leave other currencies? The US consumer is the consumer of last resort. However, with China increasing its internal consumption, that may not be as true as it once was.

In the short term, next couple of weeks, I expect USD weakness.

jog on
duc

 

[ducati916]

Earnings season now underway. The market is kinda/sorta:

We are in the middle of the range. Which simply means we can go either way. Earnings are bad/worse than expected or forward guidance sucks and we could have a bit of a decline. Earnings better than expected, we can move up. Earnings will play out in the daily time frame.

Longer time frames are looking bullish. Here we have Transports (aggressive and include airlines) with Utilities (classically defensive) and we are moving towards all-time-highs. As we hit all-time-highs we may see a pullback and retest. For the moment, bullish.

We can see that there is rotation in the leadership. This is a good thing. Top chart last year. Lower chart last 6 months.

Gold & Silver: I have gold moving lower. The 10yr is moving to 1.3%, which means gold is moving lower. Not a crash, just a steady grind lower. The interesting dynamic will be if the Fed. caps at somewhere between 2%/3%, then gold moves higher again.

Which raises a really interesting trade: The Carry Trade. If the Fed. caps rates and you can sell in any amount, $1B, $10B, whatever your maximum margin is, Treasury Bonds and buy a higher yielding asset class, this trade will be put on in massive size and leverage. To purchase let's say $5T in selling, the Fed's Balance Sheet will simply go nuclear. That is when gold moves to the $5000/oz+.

The second dynamic will be: the arbitrage, will it be US assets or non-US assets? I think initially US assets (MBBS, Corporates) will all catch a bid and go to ZIRP and possibly NIRP in real terms. Then riskier assets will catch a bid, dividend paying stocks etc, which will include Emerging markets.

What happens when the Fed. reverses? All of those trades go into a massive reverse. This will cause a huge crash as not everyone can exit at the same time. Rates will fall back to zero. The big players, closing out an arb. will likely be whole: marginal players may be carried out on their shield.

This is likely to occur when inflation has taken hold. So now we have a situation where inflation is running, yields are at zero, which drives inflation even higher.

So can the Fed. raise rates? Of course. Will they? If they raise above the cap. then those huge carry trades start to close out with a loss in one leg of the trade, combined with a potential market crash against all risk assets. Will they raise? I have no idea.

Meanwhile, flippe-floppe-flye:

One of the risks of BTC I guess.

History of last year:

jog on
duc

 

[ducati916]

We have a mixed bag:

With Trump on the way out, his record:

The market continues to vacillate between 'inflation, disinflation and deflation'. The returns historically:

Disinflation (without doubt) is better. Yet, inflation is what the Fed. seeks. That is because deflation is the 1929-1934 experience.

Then we have the 'growth v value' argument: over longer time frames, there is not much in it. If you can switch between the 2 strategies at optimal times, then you will have quite significant outperformance.

Gold:

I actually find this to be a really bullish set-up.

On a daily set-up, it looks horrible:

On my ratio chart: could go either way. This really is reflective of the 'inflation, disinflation, deflation' argument that is currently being traded across all financial markets. The answer is: no-one actually knows. There are simply too many moving parts and unforeseeable ramifications currently.

We may have a few technical breaks that turn out to be wrong, followed by reversals.

BTC: read this article:

Bitcoin: Magic Internet Money | Research Affiliates

The sage advice to “know what you are investing in” is being dangerously overlooked by both novice and seasoned investors when it comes to bitcoin. A former bitcoin miner explains why the price of BTC is nearly certainly a bubble and likely manipulated. Investors should proceed with extreme caution.

www.researchaffiliates.com

The Fed.:

And Mr flippe-floppe-flye:

Earnings (proper) kicked off with the banks: JPM released reserves as earnings, as will I suspect many of the other banks. Hence the meh response to the big earnings beats by the market.

Highest conviction trade: rates to 1.3%. Stocks can live with that. Gold, hmmm, not so sure. BTC, now that the spectre of fraud is in the air, if investigated/whatever....zero.

jog on
duc

 

[ducati916]

US markets look set to fall into the start of the week:

From Friday's close, we had a jump in vol. I think this continues and breaks the trend line. You could blame interest rates, the dollar, BTC, economy, Trump, whatever. The thing is vol. has not moved to a new low. That is the issue. The US markets are structured to sell vol. and suppress it. When it doesn't happen, then you have to be on the lookout for a jump higher.

Now this is not the end. Far from it. But it could be a slightly deeper sell-off than we have had for a few weeks.

From Mr flippe-floppe-flye

jog on
duc

 

[ducati916]

With US markets closed for MLK day, just thought I would comment on the gold analysis.

So while I have nothing against a purely 'technical' analysis of a price chart, I would argue that that analysis has to be placed in a context of a fundamental perspective to hold any predictive power.

Gold, outside of its purely speculative component is pitched as an inflationary hedge against devaluation of a currency. An alternative and superior form of money.

In the shorter term (our lifetimes) that value will fluctuate.

It will fluctuate around the current economic/social/financial state of affairs in which we live. The question (for gold) that has dominated since 2008 through today is the question: deflation/disinflation/inflation/hyper-inflation?

The correlation to interest rates has always been high. It is high because interest rates (real & nominal) drive the value of a fiat currency and by extension its shadow currency (gold).

In this chart, I simply left the EMAs on the analysis. It is striking how the 10yr yield has crossed the 50EMA. That is bullish for rates. By implication, that must be bearish for gold. When the Fed. cap rates, which they have stated that they will, that is bullish (very) for gold. If rates continue to rise and they will, the 10yr is on its way to 1.3%, gold will continue to exhibit weakness.

Looking at gold/gold mining charts in isolation, I agree, they sorta/kinda look bullish. We'll see. Count me a bear.

jog on
duc

 

[ducati916]

Pretty quiet day for earnings: the major report is NFLX after the close, the first of the major Tech. firms to report.

The VIX is suppressed, but not out: until it makes new lows, that risk remains.

Sold GE ahead of earnings:

The last month:

Energy the leading sector. Tech. has stagnated and gone nowhere. We want Tech. to come back.

Energy news:

Friday, January 15th, 2021

Oil prices fell back on Friday over demand concerns. News that China has reported its highest Covid-19 case count in months weighed on market sentiment.

OPEC sees shale rebounding. OPEC admitted that an improved outlook for crude oil prices could result in higher U.S. shale production. OPEC upgraded its forecast for U.S. oil production, expecting an increase of 370,000 bpd, up from a previous forecast of 71,000 bpd.

LNG spike causing havoc worldwide. Bitter cold and skyrocketing prices for LNG is now being felt in more places than just Asia. The ripple effects are affecting gas markets everywhere, straining supplies and forcing consumers to cut back. Another potential side effect could be the undermining of the spot market, potentially leading to more emphasis on oil-linked contracts, which would provide more stability.

Total quits API. Total (NYSE: TOT) announced its decision to withdraw from the American Petroleum Institute, the industry’s most powerful lobby. The French oil giant cited API’s opposition to methane regulations, EV subsidies, and carbon pricing. Total also disagreed with API’s political contributions to U.S. politicians that oppose the Paris Climate Agreement.

Gas projects in Mozambique at risk. A chronic insurgency puts Total’s (NYSE: TOT) $23 billion gas production and LNG export project at risk. The same is true of ExxonMobil’s (NYSE: XOM) planned $33 billion facility. Total has halted work at its site due to nearby attacks.

JPMorgan touts commodities, pro-risk posture. JPMorgan told investors to boost commodity positions, go underweight on bonds and take a pro-risk exposure to equities. “We increase our overweight in commodities, in particular energy, both as an inflation hedge and to position for a continued cyclical recovery,” analysts wrote.

Exxon target of new SEC probe. ExxonMobil (NYSE: XOM) is under investigation by the Securities and Exchange Commission (SEC) after an employee filed a whistleblower complaint last fall, alleging that the company has overvalued its Permian assets.

Shale boosts hedging. U.S. shale drillers increased hedging with WTI surging above $50 per barrel.

Is the rally in renewables sustainable? Solar and wind power companies have soared in value. The New York Times explores the potential bubble in clean tech stocks.

Biden’s $1.9 trillion stimulus could preview energy package. President-elect Biden proposed a $1.9 trillion covid rescue package, which included vaccination efforts, $1,400 checks to Americans, and other stimulus measures. He has indicated that a sequel package in the spring, which could be even larger, would target major investments in clean energy.

Halliburton turns to grid instead of diesel. Halliburton (NYSE: HAL) is swapping out diesel engines for the electric grid for its Permian basin operations.

Shell declares force majeure on Forcados. Royal Dutch Shell (RDS.A, RDS.B) says loadings of Nigeria's key export grade Forcados are on force majeure due to the shutdown of the Trans Forcados pipeline.

Summit Midstream Partners soars on greenlight. Summit Midstream Partners, LP (NYSE: SMLP) saw its share price shoot up after its Double E Pipeline received a greenlight from FERC.

ExxonMobil upgraded by JPMorgan. JPMorgan upgraded ExxonMobil (NYSE: XOM) to Overweight for the first time in seven years.

Siemens to produce hydrogen from wind. Siemens Gamesa (BME: SGRE) and Siemens Energy (ETR: ENR) are developing a commercial offshore wind turbine that produces hydrogen via electrolysis, the companies said.

EIA: Oil production to rise to 11.49 mb/d in 2022. The EIA unveiled its first forecast for 2022, projecting that U.S. oil production rises to 11.49 mb/d, a 3% increase over this year’s levels.

Proterra to go public. Electric bus producer Proterra will launch an IPO, with preliminary estimates valuing the company at $1.8 billion.

Saudi cuts exports to Asia. Saudi Arabia has reduced sales of oil to at least 11 refiners in Asia, evidence that it is following through to some degree on its pledge to cut production by 1 mb/d.

Gasoline profit margins increase. The profit margin for refining gasoline has widened to its largest extent since July, as markets anticipate demand recovery by mid-year.

U.S. warns European companies on Nord Stream 2. The Trump administration warned European companies that they risk U.S. sanctions over their involvement in the Nord Stream 2 pipeline.

Equinor wins offshore wind contract in New York. Equinor (NYSE: EQNR) was selected for a major offshore wind project off the coast of Long Island. The combined 3.3 GW Empire Wind and Beacon Wind projects will be the largest offshore wind installation in the U.S. to date.

Chesapeake Energy to emerge from bankruptcy. Chesapeake Energy will emerge from bankruptcy valued at over $5 billion.

Occidental to use direct air capture for oil production. Occidental Petroleum (NYSE: OXY) plans to build a direct air capture (DAC) facility, which will remove carbon dioxide from the atmosphere, and then use the CO2 to produce more oil. The project could be the world’s first large-scale DAC facility and it could cost hundreds of millions of dollars.

Forest Service gives go-ahead to Marcellus pipeline. The U.S. Forest Service approved the construction of the Mountain Valley Pipeline through a sensitive part of the Jefferson National Forest, a big win for a project that would carry Marcellus shale gas to the U.S. southeast.

Ireland drops another LNG terminal over methane concerns. The Port of Cork in Ireland allowed an agreement with NextDecade Corp. (NASDAQ: NEXT) for an LNG import terminal to expire. It’s the latest setback for the LNG company in Europe over concerns about methane emissions. NextDecade is planning an LNG export terminal in Texas.


Nothing from Mr flippe-floppe-flye currently. In his absence, 2021 predictions:

jog on
duc

 

[ducati916]

So in this morning's post, the chart displayed that in the last month, energy was leading the pack. Here's why:

More news:

Market Movers

- ExxonMobil (NYSE: XOM) said that its latest well in offshore Guyana did not find commercial volumes of oil. That is the second setback the company has faced in Guyana in recent months.

- ConocoPhillips (NYSE: COP) announced that it has completed its acquisition of Concho Resources.

- Tellurian (NASDAQ: TELL) co-founder Charif Souki said that the company is aiming to start construction on its $16.8 billion Driftwood LNG project this summer.

Tuesday, January 19, 2021

Oil prices fell more than 2% on Monday on rising concerns about oil demand. New lockdown restrictions in China spooked the market. “The COVID-19 pandemic’s spread is taking center stage again and traders are getting increasingly worried about the long duration of European lockdown and about the new restrictions (in) China,” Bjornar Tonnage from Rystad Energy said. However, oil regained lost ground in early trading on Tuesday.

IEA: Demand to recover by 5.5 mb/d. In the IEA’s January Oil Market Report, the agency projects that oil demand will bounce back to 96.6 mb/d this year, an increase of 5.5 mb/d over 2020 levels. That erases some of the 8.8-mb/d decline from last year. However, the agency cut its forecast for first-quarter demand by 600,000 bpd compared to last month’s report. On the supply side, production will increase by 1 mb/d this year, after declining by 6.6 mb/d in 2020.

Biden may cancel Keystone XL. President Biden may cancel the permit for the Keystone XL, perhaps on his first day in office, according to Reuters. In an effort to stave off a death sentence for the project, TC Energy (NYSE: TRP) said it would make the pipeline have a net carbon zero emissions profile by spending $1.7 billion on renewable energy to power the pipeline and to use union labor. Bloomberg reports that materials and pipe could be sold for scrap.

Biden executive orders planned for Day 1. A series of executive orders are expected on Wednesday from newly inaugurated President Biden. In addition to one on Keystone XL, Biden is expected to rejoin the Paris Climate Agreement, reimpose methane regulations on oil and gas operations, use the federal procurement power to make government buildings shift towards clean energy, and block new drilling permits in the Arctic National Wildlife Refuge.

Sky-high LNG prices may not last. The rally in LNG prices in Asia is likely temporary. While February JKM prices topped $21/MMBtu, April contracts are trading at around $7. And the long-term pricing outlook for LNG remains bearish, according to the Wall Street Journal. China stands at the center of long-term forecasts, and China’s domestic gas production is on the rise, increasing by 9% in the first 9 months of 2020.

Oil majors benefit from LNG price spike. Majors such as Royal Dutch Shell (NYSE: RDS.A) and Total (NYSE: TOT) might benefit more from the LNG price spike than trading houses due to their access to multiple sources of gas, allowing them to reroute cargoes, according to Reuters.

Total buys $2.5 billion stake in Indian renewables company. Total (NYSE: TOT) is investing $2.5 billion to acquire a 20% stake in Adani Green Energy Ltd., an India-based renewable energy company.

IEA: New methane report warns cuts needed. Oil and gas operations emitted 70 million metric tons of methane in 2020, a 10% reduction from the year before due to the pandemic, according to the IEA’s new report on methane. “The task now for the oil and gas industry is to make sure that there is no resurgence in methane emissions, even as the world economy recovers, and that 2019 becomes their historical peak,” said IEA executive director Fatih Birol. The IEA said that methane emissions need to decline by 70% over the next decade.

Enbridge defies Michigan, attempts to keep Line 5 open. In November, Michigan ordered the Line 5 pipeline shut down. On January 12, Enbridge (NYSE: ENB) wrote a letter arguing that the state didn’t have the authority to shut down the aging pipeline.

China’s economy picked up speed in the fourth quarter. China’s GDP grew 2.3% in 2020, making China the only major economy that did not suffer economic contraction last year. China grew 6.3% in the fourth quarter, year-on-year.

$501 billion in decarbonization. The world invested $501 billion into cleantech and decarbonization efforts in 2020, beating the previous record by 9%, according to BloombergNEF. That included more than $300 billion on renewable energy and nearly $140 billion one electric vehicles.

Pipeline issue hits Libyan production. A leak that forced the shutdown of an oil pipeline in Libya has reduced its recovering oil production by as much as 200,000 bpd.

SEC to increase scrutiny on oil and gas. The Biden administration is likely via the SEC to increase disclosure requirements related to climate risk for oil and gas companies. In fact, a more aggressive push on ESG standards and requirements could be in the offing. The Wall Street Journal looks at the SEC’s potential agenda. Bloomberg also looks at the SEC, although from the angle of financial fraud in the oil and gas industry.

Court strikes a fatal blow to Trump carbon rule. The U.S. Court of Appeals for the District of Columbia Circuit killed the Trump administration’s rule on power plant emissions. The court said that the Affordable Clean Energy (ACE) rule, a watered-down replacement for the Obama-era Clean Power Plan, did not adequately protect health and the environment. The decision gives the Biden administration something of a clean slate to start over.

Russia starts work on its Arctic mega project. Russia is aiming to develop the massive Vostok project. Rosneft expects the operation to cost $170 billion over a decade that will employ 400,000 workers, create 15 new industrial towns, and build 800 km of new pipelines. The Vostok projects should already produce 30 million tonnes of oil by 2024 which rounds up to 600,000 barrels per day. Eventually, it could produce as much as 2 mb/d.

Biden to face question on Venezuela fuel swaps. Representatives of fuel suppliers in Venezuela are expected to press the Biden administration to loosen the ban on fuel swaps for the impoverished country.

Axis Capital rules out Arctic projects. Axis Capital Holdings Ltd. said it wouldn't insure oil and gas projects in the Arctic National Wildlife Refuge, the first underwriter to rule out insurance for the Arctic.

Money pouring into offshore green investments. The Wall Street Journal reports that investors are pouring money into retrofitting deep-sea vessels that once serviced offshore oil projects to now handle offshore wind installations.

From Mr flippe-floppe-flye:

jog on
duc

 

[ducati916]

Stocks are evenly balanced atm. Up or down. If down, that will remain a buy the dip proposition as the bull trend remains intact. So all we are talking about (currently) are fluctuations to the downside. Vol. is again suppressed, it will at some point break higher...see above.

The thing is: breadth is weakening. This takes time to play out. Days, weeks, hours, who knows. Sometimes, it just picks itself back-up again. Sometimes it doesn't. The issue (for me) is that when declining breadth is combined with a consolidating VIX, it spells trouble down the road. As already stated: not a bull ending decline, simply a buy the dip decline.

GM has partnered with MSFT

BTC waiting on 50day. It will either (a) find support and move higher or (b) break below, in which case a lot of latecomers will feel the pain. The pain will test their religious fervour for BTC and all things crypto. Which way? No idea.

History

Mr flippe-floppe-flye

Gold: still bearish, although gold is having a better day today. Interest rates will continue to rise (at least until the Fed. caps them) and gold does not like a rising rates environment. If rates stop rising (other than a Fed cap) then that means the market is no longer fearing inflation. Inflation is the 'big' thing for gold?

If there were to be a deflation, which with $14T in corporate debt and the resulting bailout, could/would lead to a potential hyper-inflation, then gold would shine. This (as far as the Fed is concerned) is the doomsday scenario.

So I think rates continue to rise to 1.3%, gold declines. To low to cap. Fed. continues to nudge/push inflation and rates rise to 2%, gold falls. At 2% the stock market has another tantrum. The Fed. caps. Now gold rallies from its lows as inflation will/could take hold.

In a meh situation, gold just fluctuates in a holding pattern.

jog on
duc

 

[gartley]

When I first started to look at Elliott Waves and the Fibonacci sequence more than 25 years ago I noticed a very important time based fibonacci relationship. This has been such a good long term guide it amazes me to this day. Basically counting the number of Fibonacci/Lucas sequence years between past historic tops or bottoms:
1932 low to 1966 high: 34 Years (Fib No)
1932 low to 1987 high: 55 years (Fib No)
1932 low to 2000 high: 76 years (Lucas no)
1987 high to 2008 high: 21 Years (Fib No)
These are just some examples and there are more.

There is also a very important Fibonacci countdown in progress which ends in the year 2021 as follows:
1932 low to 2021: 89 Years
1966 high to 2021: 55 years
1987 low to 2021: 34 years
2000 high to 2021: 21 Years
2008 high to 2021: 13 years
Jan 2013 low to 2021: 8 years ( this low was when QE expanded)
2016 low 2021: 5 years
2018 low to 2021: 3 years
2020 low to 2021: 1year

This suggests 2021 to be a very volatile year and the Covid crash was probably just the warm up of what is about to start.

Looking at the long term Delta timing chart this suggests a peak sometime in the next 2 months plus or minus and the cycle projection for the SPX of around 4150 still has not been met.....

 

[qldfrog]

When I first started to look at Elliott Waves and the Fibonacci sequence more than 25 years ago I noticed a very important time based fibonacci relationship. This has been such a good long term guide it amazes me to this day. Basically counting the number of Fibonacci/Lucas sequence years between past historic tops or bottoms:
1932 low to 1966 high: 34 Years (Fib No)
1932 low to 1987 high: 55 years (Fib No)
1932 low to 2000 high: 76 years (Lucas no)
1987 high to 2008 high: 21 Years (Fib No)
These are just some examples and there are more.

There is also a very important Fibonacci countdown in progress which ends in the year 2021 as follows:
1932 low to 2021: 89 Years
1966 high to 2021: 55 years
1987 low to 2021: 34 years
2000 high to 2021: 21 Years
2008 high to 2021: 13 years
Jan 2013 low to 2021: 8 years ( this low was when QE expanded)
2016 low 2021: 5 years
2018 low to 2021: 3 years
2020 low to 2021: 1year

This suggests 2021 to be a very volatile year and the Covid crash was probably just the warm up of what is about to start.

Looking at the long term Delta timing chart this suggests a peak sometime in the next 2 months plus or minus and the cycle projection for the SPX of around 4150 still has not been met.....
View attachment 118799View attachment 118800

@gartley i am a believer in cycles too,but we have to always use caution.
Post GFC, i found a market period which had an eerie match: time shift and scale with the asx graph.
I invested accordingly, made 60k paper profit with options in hardly a month, went for a holiday, unplugged, in Thailand and came back to a couple k loss/breakeven.
QE....yeap
So never underestimate the ability of the power in place to manipulate what should be and replace it by what they want: be it CC, covid or Market.
It is a mistake i am guilty of ..