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Looked through a list of SPACs and FFF is right, they've gone gangbusters over the past few weeks. A monkey with a dart could have made money. Now where's that monkey, oh he's on my back.
The New Bull Market
- Thread starter ducati916
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The commodity theme and arguments continue for an impending bull market that is (now) underway:
First up: Canadian dollar, Canada being a major resource producer.
Oil as against food products, really highlighting the PPI component.
Credit spreads between Treasuries/Corporate BBB. When economies recover, less risk in BBB and higher returns.
This is a new one on me: chemical usage has been pretty reliable (2 negative positives signalled by red line).
The overall commodity market.
So early days. Obviously it could (and might) be derailed by a further macro-event. However, the probabilities are starting to lean towards an inflationary type of market and away from a deflation event. Also, the disinflationary forces that were operating are now exerting far less influence than they were prior to C19. To me, that is possibly the big takeaway from C19 - the disinflationary forces have been blunted, opening the door to a return (although weaker currently) to the inflationary forces that operated in the 1970's.
One prediction, if it were to come to pass, could add some further impetus to the inflationary forces:
www.home.saxo
Now my thinking is that a UBI provides something similar to the COLAs that previously existed and was 1 component (an important one) in the 1970s style inflation.
Of course, Mr flippe-floppe-flye is all over this:
I'll consider gold later. I'm on my other computer and cannot access my normal library.
jog on
duc
First up: Canadian dollar, Canada being a major resource producer.
Oil as against food products, really highlighting the PPI component.
Credit spreads between Treasuries/Corporate BBB. When economies recover, less risk in BBB and higher returns.
This is a new one on me: chemical usage has been pretty reliable (2 negative positives signalled by red line).
The overall commodity market.
So early days. Obviously it could (and might) be derailed by a further macro-event. However, the probabilities are starting to lean towards an inflationary type of market and away from a deflation event. Also, the disinflationary forces that were operating are now exerting far less influence than they were prior to C19. To me, that is possibly the big takeaway from C19 - the disinflationary forces have been blunted, opening the door to a return (although weaker currently) to the inflationary forces that operated in the 1970's.
One prediction, if it were to come to pass, could add some further impetus to the inflationary forces:
Universal basic income decimates big cities
The new UBI drives changes in the attitude toward work and life balance and the professionals and the marginal workers in big cities also begin to leave, as job opportunities dry up.
www.home.saxo
Now my thinking is that a UBI provides something similar to the COLAs that previously existed and was 1 component (an important one) in the 1970s style inflation.
Of course, Mr flippe-floppe-flye is all over this:
I'll consider gold later. I'm on my other computer and cannot access my normal library.
jog on
duc
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EOW and the market is still teetering.
It's down, but not necessarily out: we are only just seeing a ratchet up in vol. Now the market could rally hard into the close and that VIX reading will come down and fall under the trend again. I have an (new) additional trend to add to the chart, which suggests higher vol. to go, but I'll wait until the close for the w/e.
Across in Bond land:
A golden cross for the 10yr. Does it actually mean anything? Well (a) yes if the Fed doesn't cap it and (b) no, if the Fed caps it. If it continues to rise into 2021, I think the Fed caps it. You cannot have the current situation with credit becoming more expensive (potentially a lot more) therefore the Fed will step in. Which means that gold/BTC are potential winners in waiting, although BTC has already had a big move.
Rotation into value has been all over the newswires, so just confirming really.
Emerging markets, meh. Which means at some point, they could catch fire.
SPACs on fire.
And finally the 'natural' emotions one has to overcome in the market.
Or just follow the Master:
jog on
duc
* And a late addition:
Not what the market wants to hear. In the US a decision from the FDA is expected next Friday.
It's down, but not necessarily out: we are only just seeing a ratchet up in vol. Now the market could rally hard into the close and that VIX reading will come down and fall under the trend again. I have an (new) additional trend to add to the chart, which suggests higher vol. to go, but I'll wait until the close for the w/e.
Across in Bond land:
A golden cross for the 10yr. Does it actually mean anything? Well (a) yes if the Fed doesn't cap it and (b) no, if the Fed caps it. If it continues to rise into 2021, I think the Fed caps it. You cannot have the current situation with credit becoming more expensive (potentially a lot more) therefore the Fed will step in. Which means that gold/BTC are potential winners in waiting, although BTC has already had a big move.
Rotation into value has been all over the newswires, so just confirming really.
Emerging markets, meh. Which means at some point, they could catch fire.
SPACs on fire.
And finally the 'natural' emotions one has to overcome in the market.
Or just follow the Master:
jog on
duc
* And a late addition:
Not what the market wants to hear. In the US a decision from the FDA is expected next Friday.
Last edited:
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Start with oil news:
Friday, December 11th, 2020
Brent hit $50 per barrel on Thursday for the first time since March, edging higher on optimism surrounding vaccinations, the OPEC+ deal, plus strong demand in Asia. However, prices eased a bit on Friday as demand in Europe and the U.S. remains subdued and Covid-19 cases continue to spread. The EIA also reported a surge in crude inventories for last week, up 15.2 million barrels.
Signs of demand rebound in Europe. Many European countries went back into lockdown in November, but are loosening restrictions again. Bloomberg says that road usage is on the rise, hitting a two-month high.
Pemex suspends work with Vitol. Pemex suspended business with Vitol after the oil trader paid $160 million to settle bribery charges. Vitol settled charges for paying bribes in Brazil, Mexico and Ecuador.
Exxon makes Suriname discovery. ExxonMobil (NYSE: XOM) and its partner Petronas announced a discovery in offshore Suriname, the first in the country for the partnership. The discovery adds to Exxon’s already large footprint in neighboring Guyana.
SEC to vote on disclosures. The Securities and Exchange Commission will vote on December 16 on whether or not to approve new disclosure rules for oil, gas and mining companies related to payments to foreign governments. It is the third iteration of the rule and stems from the 2010 Dodd-Frank law.
BLM fast-tracks Uinta Basin land sale. The Trump administration is fast-tracking a proposed 2,100 lease sale in Utah for tar sands developers.
Germany hopes to insulate Nord Stream 2. Germany is looking for ways to insulate the Nord Stream 2 project from U.S. sanctions. The pipeline is more than 90% finished but has been held up by sanctions.
EU clinches deal on tougher CO2 targets. The European Union has agreed to tighten climate targets to 55% reduction in CO2 by 2030 (from a 1990 baseline), ramping up ambition from the current 40% reduction. Carbon prices in Europe rose to 31 euros per tonne, an all-time high.
Texas regulator banned from waiving environmental rules. The Texas Railroad Commission has been banned from enforcing a string of environmental rule waivers after a judge ruled the agency had failed to provide the public with adequate advance notice of such moves, first proposed in the spring.
Top shale gas basin continues to bleed cash. Frackers in the top shale gas basin, the Appalachia, continue to bleed cash, despite the deep cuts in capital expenditures this year as a result of the plunge in gas prices in the first half of 2020 due to mild winter early in the year and depressed demand later on with the pandemic.
Investors turn to SPACs. Burned by shale, investors are increasingly turning to clean energy SPACs, according to the Wall Street Journal. Private equity has done more deals in clean energy than oil and gas in 2020. Special-purpose acquisition companies (SPACs) are a new popular vehicle – SPACs raise money, go public, and only then do they merge with a startup company. The number of SPACs has skyrocketed this year.
Some companies could benefit from a pipeline shortage. Some pipeline operators with pipes already in the ground will see the value of their existing pipelines rise amid a looming scarcity of infrastructure, analysts say.
Shell executives resign over the pace of transition. Some top executives at Royal Dutch Shell (NYSE: RDS.A) resigned over a disagreement over how quickly the company would pursue its clean energy transition.
Consolidation in Canada’s oil industry. Whitecap Resources (TSE: WCP) said it would buy rival TORC Oil & Gas Ltd (TSE: TOG) in an all-stock deal worth C$552 million. It’s the latest sign that the downturn is forcing consolidation in the industry.
Oil majors take advantage of tax havens. Reuters published an investigation detailing how the oil majors shift billions of dollars in profits to tax havens, often in island nations in the Caribbean. From Reuters: “In 2018 and 2019, Shell earned more than $2.7 billion - about 7% of its total income in those years - tax-free by reporting profits in companies located in Bermuda and the Bahamas that employed just 39 people and generated the bulk of their revenue from other Shell entities.”
UAE awards contract to Occidental. Occidental Petroleum (NYSE: OXY) won a contract for exploration in the UAE.
New York to divest from fossil fuels. The New York State Common Retirement Fund said it would divest itself from the riskiest oil and gas stocks by 2025. The $226 billion pension fund is the largest yet to divest from fossil fuels.
Oilfield services lost more than 91,000 jobs. The U.S. oilfield services sector lost 91,680 jobs since the market downturn started last March.
D.E. Shaw pushes Exxon to cut CAPEX deeper. D.E. Shaw & Co., which owns a sizable portion of ExxonMobil (NYSE: XOM), is pressuring the oil major to cut its spending in order to protect the dividend. The shareholder argues that Exxon is overspending and posting poor returns, resulting in its position slipping below that of Chevron (NYSE: CVX). D.E. Shaw says Exxon should slash CAPEX to $13 billion, down from a planned $23 billion this year.
WoodMac: 77% of LNG projects at risk. A new report from Wood Mackenzie says that 77% of new LNG projects are at risk in a 2-degree climate scenario. In other words, climate policy will result in renewables outcompeting LNG.
LNG gaining traction in shipping. Recently enacted IMO rules are forcing the shipping industry to use alternative fuels to slash emissions. LNG is gaining traction as a fuel source, the Wall Street Journal reports.
Tesla’s shares “dramatically overvalued.” JPMorgan said that Tesla (NASDAQ: TSLA) was “dramatically overvalued.” The company’s shares have climbed 800% in the past two years.
This week's market data:
The market is still overwhelmingly bullish.
From very subjective to more objective:
Those are pretty high for NYSE, but the NASDAQ has come off the boil, which is the rotation. However as the IPO data will demonstrate, that rotation, growth to value, is likely to be (a) reversion to the mean and (b) more importantly, growth into a gradually re-opening economy. So growth will likely re-dominate, just a different set of hot stocks.
As can be seen from above, there have been some pretty big IPOs this week. The biggies moving way past their offering price. Comparisons have inevitably been drawn to 1999. Also highlighted as distinguishing this crop is that unlike 1999, these actually have earnings. Earnings or not, when an IPO lists and jumps 100% in an hour or so, that is a frothy market. Frothy markets are dangerous markets because they are volatile markets.
Too many issues here: look at the increase in money supply %. This is in part to finance government deficit spending which is now x2 tax revenue. We have the MMT crowd who maintain that this is never an issue. The fact is: to this point it has not been an issue. It does not automatically follow that it will never be an issue.
Which brings me to gold:
The commercials (Bullion Banks) are selling gold hard. There are all manner of reasons why. One of those reasons is that their accounting is end of November and at 1 point, there were 150,000 CALL contracts, which if the POG fell, would expire worthless and flow to their bottom line. So we have the market makers trading against gold.
We have also had the fundamental macro-picture of rising rates trading against gold. This past week has been a real will they, won't they picture re. continuing rising yield. The fluctuations away from trend have reduced, leading one to speculate that possibly a change in trend is coming, ie: higher POG or the resumption of the gold bull.
Looking at the miners rather than gold itself, is not a slam dunk trade either way. They also sit at somewhat of a midpoint.
Just a straight price chart and I would be saying lower, which is why I would never look at this in isolation. From the 2 above charts we know that the current trend is potentially at an inflection point. For that reason, the time was perfect (for me) to place a substantial market neutral trade and simply let the market move me to a profit, given that either (a) trend continues or (b) trend reverses. Both potentially carry the promise of a significant move (and therefore profits).
Finally, Mr flippe-floppe-flye:
Final word re. $VIX: which pulled back from its intra-day high reading of +9% to a +3.6% increase. That places it, you guessed it, right on the trend-line. Which means (a) the pullback is over or (b) next week the trend is breached and stocks have further to fall. I'll do a summation possibly later, but everything else says lower stock prices: the bear move has only just begun. So essentially, I agree with Mr fff.
Next week I'll be looking (well today actually) for another market neutral position that is poised for glory. I'm thinking biotech, but will need to research it today.
jog on
duc
Friday, December 11th, 2020
Brent hit $50 per barrel on Thursday for the first time since March, edging higher on optimism surrounding vaccinations, the OPEC+ deal, plus strong demand in Asia. However, prices eased a bit on Friday as demand in Europe and the U.S. remains subdued and Covid-19 cases continue to spread. The EIA also reported a surge in crude inventories for last week, up 15.2 million barrels.
Signs of demand rebound in Europe. Many European countries went back into lockdown in November, but are loosening restrictions again. Bloomberg says that road usage is on the rise, hitting a two-month high.
Pemex suspends work with Vitol. Pemex suspended business with Vitol after the oil trader paid $160 million to settle bribery charges. Vitol settled charges for paying bribes in Brazil, Mexico and Ecuador.
Exxon makes Suriname discovery. ExxonMobil (NYSE: XOM) and its partner Petronas announced a discovery in offshore Suriname, the first in the country for the partnership. The discovery adds to Exxon’s already large footprint in neighboring Guyana.
SEC to vote on disclosures. The Securities and Exchange Commission will vote on December 16 on whether or not to approve new disclosure rules for oil, gas and mining companies related to payments to foreign governments. It is the third iteration of the rule and stems from the 2010 Dodd-Frank law.
BLM fast-tracks Uinta Basin land sale. The Trump administration is fast-tracking a proposed 2,100 lease sale in Utah for tar sands developers.
Germany hopes to insulate Nord Stream 2. Germany is looking for ways to insulate the Nord Stream 2 project from U.S. sanctions. The pipeline is more than 90% finished but has been held up by sanctions.
EU clinches deal on tougher CO2 targets. The European Union has agreed to tighten climate targets to 55% reduction in CO2 by 2030 (from a 1990 baseline), ramping up ambition from the current 40% reduction. Carbon prices in Europe rose to 31 euros per tonne, an all-time high.
Texas regulator banned from waiving environmental rules. The Texas Railroad Commission has been banned from enforcing a string of environmental rule waivers after a judge ruled the agency had failed to provide the public with adequate advance notice of such moves, first proposed in the spring.
Top shale gas basin continues to bleed cash. Frackers in the top shale gas basin, the Appalachia, continue to bleed cash, despite the deep cuts in capital expenditures this year as a result of the plunge in gas prices in the first half of 2020 due to mild winter early in the year and depressed demand later on with the pandemic.
Investors turn to SPACs. Burned by shale, investors are increasingly turning to clean energy SPACs, according to the Wall Street Journal. Private equity has done more deals in clean energy than oil and gas in 2020. Special-purpose acquisition companies (SPACs) are a new popular vehicle – SPACs raise money, go public, and only then do they merge with a startup company. The number of SPACs has skyrocketed this year.
Some companies could benefit from a pipeline shortage. Some pipeline operators with pipes already in the ground will see the value of their existing pipelines rise amid a looming scarcity of infrastructure, analysts say.
Shell executives resign over the pace of transition. Some top executives at Royal Dutch Shell (NYSE: RDS.A) resigned over a disagreement over how quickly the company would pursue its clean energy transition.
Consolidation in Canada’s oil industry. Whitecap Resources (TSE: WCP) said it would buy rival TORC Oil & Gas Ltd (TSE: TOG) in an all-stock deal worth C$552 million. It’s the latest sign that the downturn is forcing consolidation in the industry.
Oil majors take advantage of tax havens. Reuters published an investigation detailing how the oil majors shift billions of dollars in profits to tax havens, often in island nations in the Caribbean. From Reuters: “In 2018 and 2019, Shell earned more than $2.7 billion - about 7% of its total income in those years - tax-free by reporting profits in companies located in Bermuda and the Bahamas that employed just 39 people and generated the bulk of their revenue from other Shell entities.”
UAE awards contract to Occidental. Occidental Petroleum (NYSE: OXY) won a contract for exploration in the UAE.
New York to divest from fossil fuels. The New York State Common Retirement Fund said it would divest itself from the riskiest oil and gas stocks by 2025. The $226 billion pension fund is the largest yet to divest from fossil fuels.
Oilfield services lost more than 91,000 jobs. The U.S. oilfield services sector lost 91,680 jobs since the market downturn started last March.
D.E. Shaw pushes Exxon to cut CAPEX deeper. D.E. Shaw & Co., which owns a sizable portion of ExxonMobil (NYSE: XOM), is pressuring the oil major to cut its spending in order to protect the dividend. The shareholder argues that Exxon is overspending and posting poor returns, resulting in its position slipping below that of Chevron (NYSE: CVX). D.E. Shaw says Exxon should slash CAPEX to $13 billion, down from a planned $23 billion this year.
WoodMac: 77% of LNG projects at risk. A new report from Wood Mackenzie says that 77% of new LNG projects are at risk in a 2-degree climate scenario. In other words, climate policy will result in renewables outcompeting LNG.
LNG gaining traction in shipping. Recently enacted IMO rules are forcing the shipping industry to use alternative fuels to slash emissions. LNG is gaining traction as a fuel source, the Wall Street Journal reports.
Tesla’s shares “dramatically overvalued.” JPMorgan said that Tesla (NASDAQ: TSLA) was “dramatically overvalued.” The company’s shares have climbed 800% in the past two years.
This week's market data:
The market is still overwhelmingly bullish.
From very subjective to more objective:
Those are pretty high for NYSE, but the NASDAQ has come off the boil, which is the rotation. However as the IPO data will demonstrate, that rotation, growth to value, is likely to be (a) reversion to the mean and (b) more importantly, growth into a gradually re-opening economy. So growth will likely re-dominate, just a different set of hot stocks.
As can be seen from above, there have been some pretty big IPOs this week. The biggies moving way past their offering price. Comparisons have inevitably been drawn to 1999. Also highlighted as distinguishing this crop is that unlike 1999, these actually have earnings. Earnings or not, when an IPO lists and jumps 100% in an hour or so, that is a frothy market. Frothy markets are dangerous markets because they are volatile markets.
Too many issues here: look at the increase in money supply %. This is in part to finance government deficit spending which is now x2 tax revenue. We have the MMT crowd who maintain that this is never an issue. The fact is: to this point it has not been an issue. It does not automatically follow that it will never be an issue.
Which brings me to gold:
The commercials (Bullion Banks) are selling gold hard. There are all manner of reasons why. One of those reasons is that their accounting is end of November and at 1 point, there were 150,000 CALL contracts, which if the POG fell, would expire worthless and flow to their bottom line. So we have the market makers trading against gold.
We have also had the fundamental macro-picture of rising rates trading against gold. This past week has been a real will they, won't they picture re. continuing rising yield. The fluctuations away from trend have reduced, leading one to speculate that possibly a change in trend is coming, ie: higher POG or the resumption of the gold bull.
Looking at the miners rather than gold itself, is not a slam dunk trade either way. They also sit at somewhat of a midpoint.
Just a straight price chart and I would be saying lower, which is why I would never look at this in isolation. From the 2 above charts we know that the current trend is potentially at an inflection point. For that reason, the time was perfect (for me) to place a substantial market neutral trade and simply let the market move me to a profit, given that either (a) trend continues or (b) trend reverses. Both potentially carry the promise of a significant move (and therefore profits).
Finally, Mr flippe-floppe-flye:
Final word re. $VIX: which pulled back from its intra-day high reading of +9% to a +3.6% increase. That places it, you guessed it, right on the trend-line. Which means (a) the pullback is over or (b) next week the trend is breached and stocks have further to fall. I'll do a summation possibly later, but everything else says lower stock prices: the bear move has only just begun. So essentially, I agree with Mr fff.
Next week I'll be looking (well today actually) for another market neutral position that is poised for glory. I'm thinking biotech, but will need to research it today.
jog on
duc
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Mr Ducati @ducati916
How do you place a market neutral and hope for profits ?
Your apprentice is lost...
I could buy share, protect with options? But then either i win or loose just a bit..can not win both way?
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Mr Frog,
There are a number of ways. The easiest is to (a) go long a stock and (b) buy a PUT of the same stock. Using the BS model you adjust for delta and volatility the number of shares you hold (this is also known as gamma scalping). If your volatility (IV) is lower than realised vol. you will turn a profit on adjustments to the delta through time (therefore you need to choose the correct time frame also). Market direction then becomes irrelevant. There is an alternative way using Convertibles, which essentially takes time out of the equation. A third way is to use the long/short ETFs and readjust (weighting or delta) either (a) at turning points (which requires being able to pick reasonably accurately turning points) or (b) based upon a calculation or (c) a combination of (a) + (b). I use (c) when using this method, which is the method I am currently using for my gold position.
Looking at the vol. going forward:
So I have added a new trend line and extended the older one. Intra-day on Friday, we extended right through the older trend line when vol. was at 9%. As we dropped back to 3%, so the trend line contained it.
I think come Monday, vol. ramps back up and we move (again) through that trend line and the market falls.
In part because of the supporting evidence:
We have had a topping pattern, followed now by a move lower.
We've had renewed PUT buying:
And
There is some funky s**t going on under the hood.
Obviously there is and has been loads of news coming out: (a) vaccines, (b) economic news, (c) Senate race concluding, (d) infection rates, (e) IPOs last week, (f) inflation/deflation, (g) etc. The market has been churning (at the top) as players take their positions. The internals rather suggest that the outcome will be lower.
Meanwhile, Mr flippe-floppe-flye
jog on
duc
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Thanks for your answer/time.
gamma scalping is well above my intelligence/data and tool access..for me to be neutral, at best, i will bear the option premium cost.and with leverage etf, you have to be good at timing.definitively well above my level.
Appreciate the market analysis, confirmation bias maybe as my systems have been reasonably bear since last week.
While Mr Skate @Skate definitively reignited my system building desires last year, following you has been an opening on the US market and revived a dormant US share account,which was only used for years as a currency exposure/insurance
Much appreciated ?
I'll add on here. I enjoy reading this thread and learning more about the US market as well. a lot to learn from this thread!
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So a little something news wise:
Which would explain why the market was struggling to go higher, but the vol. stayed quite within range. If you are (forced) to sell to rebalance and not as a fire-sale, then as a larger institution you can place larger blocks of stock, but drip feed it in. The MM will aid you in this endeavour. This so neatly explains the drift of vol. the last 2 weeks.
Are they finished? Who knows. However, if they are not and now they are running out of time, liquidity is thinning out...possibly we saw the start last week of a move lower. It is very likely to be a buy the dip, just not quite yet.
Futures are currently optimistic:
And the gold miners (specific) vol. is actually coming to an end (still a little way to go, but closer to the end than the start), where quite possibly the SPY is just getting started:
This week could be interesting!
jog on
duc
Which would explain why the market was struggling to go higher, but the vol. stayed quite within range. If you are (forced) to sell to rebalance and not as a fire-sale, then as a larger institution you can place larger blocks of stock, but drip feed it in. The MM will aid you in this endeavour. This so neatly explains the drift of vol. the last 2 weeks.
Are they finished? Who knows. However, if they are not and now they are running out of time, liquidity is thinning out...possibly we saw the start last week of a move lower. It is very likely to be a buy the dip, just not quite yet.
Futures are currently optimistic:
And the gold miners (specific) vol. is actually coming to an end (still a little way to go, but closer to the end than the start), where quite possibly the SPY is just getting started:
This week could be interesting!
jog on
duc
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So I have to be pretty quick today, I have an early start at work:
So a bit of a sell-off after a gap open. Vol. isn't doing much yet (next chart) but it could go either way.
That longer term trend (repeated in other VIX charts) seems to be holding. I remain sceptical. We'll see.
Moving to the inflation meme: Dr Copper still seems to be indicating higher inflation as do TIPS.
Which means lower gold prices:
My gold trade:
My target that lower trend line. Will it hit? Looks promising at least.
And my main man, flippe-floppe-flye:
jog on
duc
So a bit of a sell-off after a gap open. Vol. isn't doing much yet (next chart) but it could go either way.
That longer term trend (repeated in other VIX charts) seems to be holding. I remain sceptical. We'll see.
Moving to the inflation meme: Dr Copper still seems to be indicating higher inflation as do TIPS.
Which means lower gold prices:
My gold trade:
My target that lower trend line. Will it hit? Looks promising at least.
And my main man, flippe-floppe-flye:
jog on
duc
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Markets are sending mixed messages. As such, they are prone to quick reversals. Part of this is that market participants are aware that this market is seriously overvalued, but, what other options are there?
The Bond market is sending quite a different message than the Stock market. Growth (green) heading lower; inflation (red) heading higher and yields (blue) heading higher. There are still strong disinflationary forces at work; globalisation (China); debt (keeping a significant number of zombie companies alive and producing at a loss) and technology.
The US dollar (again) seems to be heading lower (inflationary) and is not that far away from a major support area. What happens there could unleash quite significant moves in Bond/Stock/Commodity markets.
Currently the Stock market is shaking off Bond market concerns and should continue with its bull run. It will simply be choppier and less certain.
Gold & mining stocks also seem to be finding a bottom and could potentially re-enter an uptrend if this bounce higher can break through the trend line. The gist being that real yields are falling below nominal yields hence the return is ZIRP or less.
For pure stockpickers have a look at these stocks. Too many to go through myself, but, if you see any promising ones, let people know.
This is what they may look like:
Meanwhile, Mr flippe-floppe-flye:
jog on
duc
The Bond market is sending quite a different message than the Stock market. Growth (green) heading lower; inflation (red) heading higher and yields (blue) heading higher. There are still strong disinflationary forces at work; globalisation (China); debt (keeping a significant number of zombie companies alive and producing at a loss) and technology.
The US dollar (again) seems to be heading lower (inflationary) and is not that far away from a major support area. What happens there could unleash quite significant moves in Bond/Stock/Commodity markets.
Currently the Stock market is shaking off Bond market concerns and should continue with its bull run. It will simply be choppier and less certain.
Gold & mining stocks also seem to be finding a bottom and could potentially re-enter an uptrend if this bounce higher can break through the trend line. The gist being that real yields are falling below nominal yields hence the return is ZIRP or less.
For pure stockpickers have a look at these stocks. Too many to go through myself, but, if you see any promising ones, let people know.
This is what they may look like:
Meanwhile, Mr flippe-floppe-flye:
jog on
duc
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So leading into Christmas markets remain twitchy. This is largely due to the various markets, currencies, commodities, bonds and stocks all watching the others. They are watching because 2 major macro-forces are vying for dominance: inflation v deflation (with disinflation blunting the effects of inflationary forces).
If 1 of the above has to win, we are rooting for inflation. Deflation (debt default on a significant scale) would potentially lead to the hyper-inflation that Schiff et al warn about. Inflation however can be easily (although not painlessly) controlled through higher interest rates. However, with the housing market bubble world wide, a rise in mortgage rates world wide would create significant issues for those unable to have a fixed rate.
Returning to the CAPE chart posted yesterday: valuations are high, which means at some point returns will be low. Obviously the market can move significantly higher. And it will continue to move higher until something happens in 1 or more of the other markets, which is why we must be alert for the first signs of trouble.
The difficulty is that we become complacent. Year after year of a rising market dulls our senses to the other markets and their signals.
So the US dollar: it looks to be resuming its down trend as against the Euro. Obviously checking as against the Yen and Yuan would be prudent. A falling dollar is inflationary as commodities are mostly priced in dollars and as the reserve currency, that translates into inflationary pressures world wide as the Fed. will at some point intervene via monetary policy (rising yields). Nothing to worry about currently.
Which of course means we watch Treasuries: so they have moved above their 50day. Bullish. Are they heading towards 2%? My model says no, not yet. 1.3% is about where I see them settling for the moment. That could change. A further weakness in the dollar could start that push to 2%.
What's on fire? Crypto.
Speculation or fundamentals? I say speculation. A valuation model based on social network effects values BTC at $12K:
On this valuation model, 21 million BTC = $75K/coin. So potentially plenty of upside, just also significant volatility should be expected.
Growth stocks or IPOs: getting richer and frothier, recalling memories of 1999.
Why would you bother? Mainly in the hope of catching the next AMZN: So the squiggly lines below are the aggregate estimates of all the analysts following AMZN. The horizontal bars are the actual earnings. Clearly, AMZN crushed consensus earnings. That is the dream: find another AMZN today for the rewards tomorrow.
All that remains, my main man: flippe-floppe-flye
Which is a good message: sit tight and be vigilant.
Thought for the day: true or false?
jog on
duc
If 1 of the above has to win, we are rooting for inflation. Deflation (debt default on a significant scale) would potentially lead to the hyper-inflation that Schiff et al warn about. Inflation however can be easily (although not painlessly) controlled through higher interest rates. However, with the housing market bubble world wide, a rise in mortgage rates world wide would create significant issues for those unable to have a fixed rate.
Returning to the CAPE chart posted yesterday: valuations are high, which means at some point returns will be low. Obviously the market can move significantly higher. And it will continue to move higher until something happens in 1 or more of the other markets, which is why we must be alert for the first signs of trouble.
The difficulty is that we become complacent. Year after year of a rising market dulls our senses to the other markets and their signals.
So the US dollar: it looks to be resuming its down trend as against the Euro. Obviously checking as against the Yen and Yuan would be prudent. A falling dollar is inflationary as commodities are mostly priced in dollars and as the reserve currency, that translates into inflationary pressures world wide as the Fed. will at some point intervene via monetary policy (rising yields). Nothing to worry about currently.
Which of course means we watch Treasuries: so they have moved above their 50day. Bullish. Are they heading towards 2%? My model says no, not yet. 1.3% is about where I see them settling for the moment. That could change. A further weakness in the dollar could start that push to 2%.
What's on fire? Crypto.
Speculation or fundamentals? I say speculation. A valuation model based on social network effects values BTC at $12K:
On this valuation model, 21 million BTC = $75K/coin. So potentially plenty of upside, just also significant volatility should be expected.
Growth stocks or IPOs: getting richer and frothier, recalling memories of 1999.
Why would you bother? Mainly in the hope of catching the next AMZN: So the squiggly lines below are the aggregate estimates of all the analysts following AMZN. The horizontal bars are the actual earnings. Clearly, AMZN crushed consensus earnings. That is the dream: find another AMZN today for the rewards tomorrow.
All that remains, my main man: flippe-floppe-flye
Which is a good message: sit tight and be vigilant.
Thought for the day: true or false?
jog on
duc
- Joined
- 13 February 2006
- Posts
- 5,057
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- 11,457
So news from the oil markets:
In 2019, the average monthly electricity bill for households declined to $115 per month, down by 1.8% compared to 2018.
- That came despite rising prices – average electricity prices rose by 12.87 cents per kWh. Lower bills were the result of lower consumption.
- Hawaii has the highest electricity bills in the country, while Alabama, South Carolina and Mississippi had the lowest.
Market Movers
- New Fortress Energy (NASDAQ: NFE) said it would offer $250 million in debt at 6.75% on senior secured notes due in 2025.
- Ecopetrol (NYSE: EC) announced a 2021 CAPEX plan of $3.5-$ billion, with 80% of that focused on Columbia, and the remaining 20% in Brazil and the U.S.
- Royal Dutch Shell (NYSE: RDS.A), Eni (NYSE: E), and other partners in the Karachaganak oil project paid $1.3 billion to Kazakhstan to settle a longstanding dispute over revenue sharing.
Tuesday, December 15, 2020
Brent rose above $50 per barrel in recent days and has held there at the start of this week. The beginning of widespread vaccinations in Western Europe and North America has led to a surge of optimism. At the same time, the Covid-19 wave is at its worst. “Brent is continuing to defy all the negative news,” said Carsten Fritsch, an analyst at Commerzbank. “More and more countries in Europe and states in the U.S. are tightening the corona restrictions over Christmas and the new year, which is likely to weigh on demand.”
IEA cuts 2021 forecast. The IEA cut its 2021 demand forecast by 170,000 bpd, largely due to a downgrade in jet fuel demand.
Oil tanker attacked in Jeddah. An “explosive-laden” boat struck a fuel tanker at the Saudi port of Jeddah. There were no casualties and no disruptions to fuel supplies, the Saudi government said.
LNG prices skyrocket. Spot LNG prices in Asia – JKM – fell below $2/MMBtu earlier this year, but have recently spiked as demand picks up. Prices spiked above $12/MMBtu.
Venezuela’s environmental nightmare. Venezuela’s oil industry has collapsed and as Bloomberg Green reports, it is resulting in an environmental disaster.
Exxon’s Guyana venture is paying off. The growing oil boom in the offshore Guyana-Suriname Basin continues to gain pace. Exxon’s latest discovery in neighboring Suriname adds even more momentum.
Exxon announces a carbon-intensity plan. ExxonMobil (NYSE: XOM) is not exactly willing to cut emissions on an absolute basis, but under withering pressure from investors, activists, and civil society, the oil major announced plans to lower carbon intensity. Exxon said it would cut emissions per production 15% to 20% below 2016 levels. But emissions could still rise if production rises. The move comes weeks after several European buyers balked at U.S. LNG shipments over concerns about methane emissions from U.S. shale.
Exxon cuts 700 jobs. ExxonMobil (NYSE: XOM) cut 700 jobs in its Houston office.
Bombshell report pours cold water on global LNG. Wood Mackenzie is warning that global energy transition goals could threaten more than two-thirds of the world’s supply of liquefied natural gas, leaving trillions of cubic meters of gas in resources stranded.
Parsley Energy lays off workers ahead of Pioneer merger. Parsley Energy (NYSE: PE) will lay off most of its workforce in Austin as part of its sale to Pioneer Natural Resources (NYSE: PXD).
Canada to hike carbon price to $170/tonne by 2030. Canada will put a carbon price of as much as $170 per tonne by 2030, up from $30 currently. The tax will rise by around $15 per year to reach that higher threshold at the end of the decade. The result could be gasoline prices that are 37 cents per gallon higher by 2030.
Canada’s oil sands back in favor. Morgan Stanley and Goldman Sachs each issued notes to clients highlighting Canadian oil sands producers for their ability to generate cash flow. They singled out Suncor Energy (NYSE: SU), Canadian Natural Resources (NYSE: CNQ) and MEG Energy Corp. (TSE: MEG). The eight largest oil sands producers generated $1.4 billion combined in free cash flow in the third quarter.
UK to end fossil fuel financing overseas. The UK said it would halt all financing for overseas fossil fuel projects as part of its latest climate initiative.
Germany aims for 65% renewables by 2030. Germany tightened its energy law, hiking its renewables goal to 65% by 2030.
Tesla hikes output amid rising demand. Tesla (NASDAQ: TSLA) said demand for its vehicles is so high that it would try to ramp up production this month. “We are fortunate to have the high-class problem of demand being quite a bit higher than production this quarter,” Elon Musk wrote in an email to staff.
Australia to subsidize refineries. Australia will pay a subsidy to struggling refineries to keep them open.
European heavy-duty trucks to phase out ICE engine. Heavy-duty truck makers in Europe announced plans to phase out the internal combustion engine by 2040.
EV sales to grow by 50% in 2021. Global sales of EVs could rise by as much as 50% next year, with ICE sales growing by just 2% to 5% (although from a much larger base), according to Morgan Stanley. 2021 “is shaping up to be a critical year for EV adoption and (internal combustion engine) de-adoption that will dictate the pace of multiple expansion, contraction, consolidation, and proliferation” among the stocks, Morgan Stanley analyst Adam Jonas said in the note.
Forest Service approves Mountain Valley Pipeline. The U.S. Forest Service issued an environmental impact statement supporting the Mountain Valley Pipeline’s route through the Jefferson National Forest. The document allows the pipeline to clear a key hurdle in the project’s completion.
Bakken no growth through at least 2022. North Dakota officials do not see any production growth from the Bakken through 2022 as companies reel from the latest downturn.
China hopes to boost shale gas. China is looking to attract investments in shale gas developments by easing restrictions on foreign entities and subsidizing costs in a bid to boost its natural gas production while its demand continues to grow.
Scotiabank rules out Arctic oil. Scotiabank became the fifth major Canadian bank to prohibit financing oil in Alaska’s Arctic National Wildlife Refuge. Most major banks in both the U.S. and Canada have now blocked financing in ANWR, but the Trump administration is hoping to finalize a lease sale before January 20.
Clean energy provisions tucked into spending bill. U.S. House and Senate leaders have agreed to include some clean energy innovation measures into a major omnibus spending bill. The bipartisan measures promote nuclear power, energy storage, carbon capture, and direct air capture.
EV models to triple in three years. The number of electric vehicle models available to consumers is expected to more than triple in the next three years, from roughly 40 to 127 in the United States.
Solar installations soaring 43%. U.S. solar installations shot up 43% this year to over 19 GW, shrugging off the pandemic.
And an interesting article on pipelines, I still hold AMZA:
oilprice.com
oilprice.com
jog on
duc
In 2019, the average monthly electricity bill for households declined to $115 per month, down by 1.8% compared to 2018.
- That came despite rising prices – average electricity prices rose by 12.87 cents per kWh. Lower bills were the result of lower consumption.
- Hawaii has the highest electricity bills in the country, while Alabama, South Carolina and Mississippi had the lowest.
Market Movers
- New Fortress Energy (NASDAQ: NFE) said it would offer $250 million in debt at 6.75% on senior secured notes due in 2025.
- Ecopetrol (NYSE: EC) announced a 2021 CAPEX plan of $3.5-$ billion, with 80% of that focused on Columbia, and the remaining 20% in Brazil and the U.S.
- Royal Dutch Shell (NYSE: RDS.A), Eni (NYSE: E), and other partners in the Karachaganak oil project paid $1.3 billion to Kazakhstan to settle a longstanding dispute over revenue sharing.
Tuesday, December 15, 2020
Brent rose above $50 per barrel in recent days and has held there at the start of this week. The beginning of widespread vaccinations in Western Europe and North America has led to a surge of optimism. At the same time, the Covid-19 wave is at its worst. “Brent is continuing to defy all the negative news,” said Carsten Fritsch, an analyst at Commerzbank. “More and more countries in Europe and states in the U.S. are tightening the corona restrictions over Christmas and the new year, which is likely to weigh on demand.”
IEA cuts 2021 forecast. The IEA cut its 2021 demand forecast by 170,000 bpd, largely due to a downgrade in jet fuel demand.
Oil tanker attacked in Jeddah. An “explosive-laden” boat struck a fuel tanker at the Saudi port of Jeddah. There were no casualties and no disruptions to fuel supplies, the Saudi government said.
LNG prices skyrocket. Spot LNG prices in Asia – JKM – fell below $2/MMBtu earlier this year, but have recently spiked as demand picks up. Prices spiked above $12/MMBtu.
Venezuela’s environmental nightmare. Venezuela’s oil industry has collapsed and as Bloomberg Green reports, it is resulting in an environmental disaster.
Exxon’s Guyana venture is paying off. The growing oil boom in the offshore Guyana-Suriname Basin continues to gain pace. Exxon’s latest discovery in neighboring Suriname adds even more momentum.
Exxon announces a carbon-intensity plan. ExxonMobil (NYSE: XOM) is not exactly willing to cut emissions on an absolute basis, but under withering pressure from investors, activists, and civil society, the oil major announced plans to lower carbon intensity. Exxon said it would cut emissions per production 15% to 20% below 2016 levels. But emissions could still rise if production rises. The move comes weeks after several European buyers balked at U.S. LNG shipments over concerns about methane emissions from U.S. shale.
Exxon cuts 700 jobs. ExxonMobil (NYSE: XOM) cut 700 jobs in its Houston office.
Bombshell report pours cold water on global LNG. Wood Mackenzie is warning that global energy transition goals could threaten more than two-thirds of the world’s supply of liquefied natural gas, leaving trillions of cubic meters of gas in resources stranded.
Parsley Energy lays off workers ahead of Pioneer merger. Parsley Energy (NYSE: PE) will lay off most of its workforce in Austin as part of its sale to Pioneer Natural Resources (NYSE: PXD).
Canada to hike carbon price to $170/tonne by 2030. Canada will put a carbon price of as much as $170 per tonne by 2030, up from $30 currently. The tax will rise by around $15 per year to reach that higher threshold at the end of the decade. The result could be gasoline prices that are 37 cents per gallon higher by 2030.
Canada’s oil sands back in favor. Morgan Stanley and Goldman Sachs each issued notes to clients highlighting Canadian oil sands producers for their ability to generate cash flow. They singled out Suncor Energy (NYSE: SU), Canadian Natural Resources (NYSE: CNQ) and MEG Energy Corp. (TSE: MEG). The eight largest oil sands producers generated $1.4 billion combined in free cash flow in the third quarter.
UK to end fossil fuel financing overseas. The UK said it would halt all financing for overseas fossil fuel projects as part of its latest climate initiative.
Germany aims for 65% renewables by 2030. Germany tightened its energy law, hiking its renewables goal to 65% by 2030.
Tesla hikes output amid rising demand. Tesla (NASDAQ: TSLA) said demand for its vehicles is so high that it would try to ramp up production this month. “We are fortunate to have the high-class problem of demand being quite a bit higher than production this quarter,” Elon Musk wrote in an email to staff.
Australia to subsidize refineries. Australia will pay a subsidy to struggling refineries to keep them open.
European heavy-duty trucks to phase out ICE engine. Heavy-duty truck makers in Europe announced plans to phase out the internal combustion engine by 2040.
EV sales to grow by 50% in 2021. Global sales of EVs could rise by as much as 50% next year, with ICE sales growing by just 2% to 5% (although from a much larger base), according to Morgan Stanley. 2021 “is shaping up to be a critical year for EV adoption and (internal combustion engine) de-adoption that will dictate the pace of multiple expansion, contraction, consolidation, and proliferation” among the stocks, Morgan Stanley analyst Adam Jonas said in the note.
Forest Service approves Mountain Valley Pipeline. The U.S. Forest Service issued an environmental impact statement supporting the Mountain Valley Pipeline’s route through the Jefferson National Forest. The document allows the pipeline to clear a key hurdle in the project’s completion.
Bakken no growth through at least 2022. North Dakota officials do not see any production growth from the Bakken through 2022 as companies reel from the latest downturn.
China hopes to boost shale gas. China is looking to attract investments in shale gas developments by easing restrictions on foreign entities and subsidizing costs in a bid to boost its natural gas production while its demand continues to grow.
Scotiabank rules out Arctic oil. Scotiabank became the fifth major Canadian bank to prohibit financing oil in Alaska’s Arctic National Wildlife Refuge. Most major banks in both the U.S. and Canada have now blocked financing in ANWR, but the Trump administration is hoping to finalize a lease sale before January 20.
Clean energy provisions tucked into spending bill. U.S. House and Senate leaders have agreed to include some clean energy innovation measures into a major omnibus spending bill. The bipartisan measures promote nuclear power, energy storage, carbon capture, and direct air capture.
EV models to triple in three years. The number of electric vehicle models available to consumers is expected to more than triple in the next three years, from roughly 40 to 127 in the United States.
Solar installations soaring 43%. U.S. solar installations shot up 43% this year to over 19 GW, shrugging off the pandemic.
And an interesting article on pipelines, I still hold AMZA:
Why Warren Buffet Is Betting Big On Oil & Gas Pipeline Companies | OilPrice.com
Pipeline companies have seen their values crash in recent years, but as it gets harder and harder to build new pipelines, markets are overlooking the real value of these vital companies
oilprice.com
Was Buffett Right About Energy In 2020? | OilPrice.com
Warren Buffett, America's most legendary investor has a long track record trading energy companies, so when he makes a move, the markets pay attention
oilprice.com
jog on
duc
- Joined
- 13 February 2006
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So the newswires are full of stories regarding (a) stimulus package, (b) vaccines and (c) Fed. policy. The market is still only slightly higher. The dollar is down and the 10yr higher as are commodities pretty much across the board. There will continue to be this trade off between inflationary forces and disinflationary forces. While economies stay in lockdown or partial lockdown, inflationary forces will likely predominate.
Deflation lives here:
While the Fed. continues to have their backs, nothing to worry about:
Crypto continues to be red hot: so on a purely chart based analysis (and really what else is there) a move to $30K is on the cards.
It is certainly correlated with both the US dollar and Gold, which suggests an inflation thesis.
So an inflation of the PPI can be hedged via Gold/Commodities (obviously) and we should add BTC to that list. Stocks on-the-other-hand do not like PPI inflation (they love CPI inflation). A rising commodity inflation combined with or caused by a dollar weakness, isn't going to feel the love from stocks (unless you are a commodity producer). This is now an area to pay attention to.
Fully endorsed by flippe-floppe-flye:
Meanwhile the actual mechanics of trading, not overly important to anyone trading over a 1 day time frame are (a) the Options market and (b) the HFT chaps.
Options first:
And the HFT chaps:
www.wsj.com
I have added a further commodities position to my gold miners position in Natural Gas, using BOIL/KOLD x2 ETFs. Now NG is one crazy commodity, however, through this week I have been 'backtesting' a methodology which on paper returned an annualised 30% with tiny risk. Tiny risk and NG simply do not belong in the same sentence. We'll see.
The market meanwhile, on tons of good news, creeps marginally higher. That (to me) is a concern. Returning to yesterday's post on IPOs and growth stories (AMZN), for the market to continue higher we need (a) growth in earnings, (b) the denominator to stay at ZIRP and (c) just enough, but not too much inflation. Well (b) we shall have. Whether we get (c) we're in the process of finding out. The issue really will be (a). I haven't really paid too much attention to the slew of IPOs. This I think is an area that merits closer study. How many (there are lots to look at) will continue to generate growth in earnings? What are their current multiples? How do they compare to the (so called) value stocks?
More questions than answers.
jog on
duc
Deflation lives here:
While the Fed. continues to have their backs, nothing to worry about:
Crypto continues to be red hot: so on a purely chart based analysis (and really what else is there) a move to $30K is on the cards.
It is certainly correlated with both the US dollar and Gold, which suggests an inflation thesis.
So an inflation of the PPI can be hedged via Gold/Commodities (obviously) and we should add BTC to that list. Stocks on-the-other-hand do not like PPI inflation (they love CPI inflation). A rising commodity inflation combined with or caused by a dollar weakness, isn't going to feel the love from stocks (unless you are a commodity producer). This is now an area to pay attention to.
Fully endorsed by flippe-floppe-flye:
Meanwhile the actual mechanics of trading, not overly important to anyone trading over a 1 day time frame are (a) the Options market and (b) the HFT chaps.
Options first:
And the HFT chaps:
High-Frequency Traders Push Closer to Light Speed With Cutting-Edge Cables
The use of so-called hollow-core fiber to convey data can give firms nanoseconds of advantage when they execute their rapid-fire trades in stocks, options and futures.
www.wsj.com
I have added a further commodities position to my gold miners position in Natural Gas, using BOIL/KOLD x2 ETFs. Now NG is one crazy commodity, however, through this week I have been 'backtesting' a methodology which on paper returned an annualised 30% with tiny risk. Tiny risk and NG simply do not belong in the same sentence. We'll see.
The market meanwhile, on tons of good news, creeps marginally higher. That (to me) is a concern. Returning to yesterday's post on IPOs and growth stories (AMZN), for the market to continue higher we need (a) growth in earnings, (b) the denominator to stay at ZIRP and (c) just enough, but not too much inflation. Well (b) we shall have. Whether we get (c) we're in the process of finding out. The issue really will be (a). I haven't really paid too much attention to the slew of IPOs. This I think is an area that merits closer study. How many (there are lots to look at) will continue to generate growth in earnings? What are their current multiples? How do they compare to the (so called) value stocks?
More questions than answers.
jog on
duc
- Joined
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- 17,145
I expect that's rose "to" not "by" - it's a truly massive price jump if it's "by".
Incidentally US electricity pricing commonly includes direct pass-through of fuel costs. So utilities aren't hugely exposed to coal or gas prices, there's a direct pass through straight to consumers written into the contract typically, the only issue being there's typically some time lag and averaging involved.
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Talking about 'growth' stocks and looking for the next AMZN: is TSLA an AMZN? I don't think so.
Which revives the argument from a few months back where Mr @Chronos-Plutus was making essentially this argument. Looks as if he was closer to the truth (reality) than many gave him credit for.
Would I short TSLA? No TSLA is a narrative stock. Until that narrative crumbles, it remains pretty much untouchable. Musk has just issued $50B in new stock. So TSLA has $50B in cash to fund it through next year...although small as against its market cap. that is still a significant chunk of change.
jog on
duc
Which revives the argument from a few months back where Mr @Chronos-Plutus was making essentially this argument. Looks as if he was closer to the truth (reality) than many gave him credit for.
Would I short TSLA? No TSLA is a narrative stock. Until that narrative crumbles, it remains pretty much untouchable. Musk has just issued $50B in new stock. So TSLA has $50B in cash to fund it through next year...although small as against its market cap. that is still a significant chunk of change.
jog on
duc
- Joined
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So Monday is when TSLA gets added to the S&P500.
The Nifty Nine: playing on the Nifty Fifty of the late 1960's. TSLA is a narrative stock. When the story (and part of that story is contained within its stock rise) ends or slows down, the stock becomes a short.
Why?
Because it is a bubble.
For TSLA to grow into its valuation is simply not going to happen. There is too much competition.
However, as far as the index is concerned:
TSLA's inclusion will create underperformance for TSLA. Will it pop the bubble? Not sure. Will it impact the index (TSLA will be 1.5%)? It will have an impact, but probably not an outsized one.
The others
Moving onto the dollar:
Part of this is the run back to risk assets outside of the US. due to the release of the vaccine. If the dollar continues to fall, obviously Gold/BTC/Commodities (Oil) will continue to rise, driving a rise in the PPI. The question is: these massive Tech. firms who use enough electricity to supply a small country in their data farms: does a rise (significant) in power costs cause a dent, even a tiny one? Or is it immaterial to their cost structure. Through the 1970-1980 and even into the 1990s, an oil crisis was bad news for the market.
Fiscal policy, currently still available for stimulus payments etc.
Which really (even if you doubt the Fed.) suggests that low interest rates are here for a looooooong time. Which must then cause a second look at the dollar to continue to move lower, as low rates combined with a rising rate of inflation is essentially a default. Who wants to hold a defaulting currency?
Moving to flippe-floppe-flye:
Now I ran out of space for charts. I'll have to make a part ii.
jog on
duc
The Nifty Nine: playing on the Nifty Fifty of the late 1960's. TSLA is a narrative stock. When the story (and part of that story is contained within its stock rise) ends or slows down, the stock becomes a short.
Why?
Because it is a bubble.
For TSLA to grow into its valuation is simply not going to happen. There is too much competition.
However, as far as the index is concerned:
TSLA's inclusion will create underperformance for TSLA. Will it pop the bubble? Not sure. Will it impact the index (TSLA will be 1.5%)? It will have an impact, but probably not an outsized one.
The others
Moving onto the dollar:
Part of this is the run back to risk assets outside of the US. due to the release of the vaccine. If the dollar continues to fall, obviously Gold/BTC/Commodities (Oil) will continue to rise, driving a rise in the PPI. The question is: these massive Tech. firms who use enough electricity to supply a small country in their data farms: does a rise (significant) in power costs cause a dent, even a tiny one? Or is it immaterial to their cost structure. Through the 1970-1980 and even into the 1990s, an oil crisis was bad news for the market.
Fiscal policy, currently still available for stimulus payments etc.
Which really (even if you doubt the Fed.) suggests that low interest rates are here for a looooooong time. Which must then cause a second look at the dollar to continue to move lower, as low rates combined with a rising rate of inflation is essentially a default. Who wants to hold a defaulting currency?
Moving to flippe-floppe-flye:
Now I ran out of space for charts. I'll have to make a part ii.
jog on
duc
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Part deux:
Just finishing off TSLA:
Now, missed BTC? Second chance?
Overall markets:
Yields continue to tick higher. The 10yr is going to 1.3%. Where will the Fed. step in? Not at 1.3%. Possibly 2% based on the 'Taper Tantrum'.
Commodities running hot. Gold/Silver as against yield, not so much. For Gold to explode, you will need the Fed. to cap yields. Gold could therefore have a long period of nowhere or even (much) lower prices until that happens. Which it will. No way the US government can run deficits the size of which they have with yields at 3%+.
And BTC is correlated with Gold and yield.
VIX is subdued and looking contained. I'm still not convinced. I'm still expecting fireworks. As such, a significant portion of the portfolio is now market neutral in gold and gas.
So these are the Mining stocks x2 leverage. They look set technically to fall lower, which fits with the thesis of rising rates. Given that they are an alternative to 'money' of the fiat kind, they separate themselves from other commodities.
Which is the (lunatic) commodity of Natural Gas. Energy and energy stocks are on fire. Will gas be towed along? Not sure. It is northern hemisphere winter and a cold winter usually means higher prices, but a warm winter, C19 issues, whatever, could have gas drop way lower. I have no idea. ATM, it looks like higher.
The dollar looks to be breaking down. Hardly surprising given its fundamental picture. But as a reserve currency, funny s**t can happen. Which is why I don't (unless I am monumentally bored) trade currencies.
jog on
duc
Just finishing off TSLA:
Now, missed BTC? Second chance?
Overall markets:
Yields continue to tick higher. The 10yr is going to 1.3%. Where will the Fed. step in? Not at 1.3%. Possibly 2% based on the 'Taper Tantrum'.
Commodities running hot. Gold/Silver as against yield, not so much. For Gold to explode, you will need the Fed. to cap yields. Gold could therefore have a long period of nowhere or even (much) lower prices until that happens. Which it will. No way the US government can run deficits the size of which they have with yields at 3%+.
And BTC is correlated with Gold and yield.
VIX is subdued and looking contained. I'm still not convinced. I'm still expecting fireworks. As such, a significant portion of the portfolio is now market neutral in gold and gas.
So these are the Mining stocks x2 leverage. They look set technically to fall lower, which fits with the thesis of rising rates. Given that they are an alternative to 'money' of the fiat kind, they separate themselves from other commodities.
Which is the (lunatic) commodity of Natural Gas. Energy and energy stocks are on fire. Will gas be towed along? Not sure. It is northern hemisphere winter and a cold winter usually means higher prices, but a warm winter, C19 issues, whatever, could have gas drop way lower. I have no idea. ATM, it looks like higher.
The dollar looks to be breaking down. Hardly surprising given its fundamental picture. But as a reserve currency, funny s**t can happen. Which is why I don't (unless I am monumentally bored) trade currencies.
jog on
duc
- Joined
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The w/e data.
In no particular order:
Sentiment remains bullish. However (as we shall see later, therein lies a warning). Dollar falling against Euro (which I track) and the Yen, which more or less mirrors the Euro. Obviously has inflationary implications.
With gold highs/lows since 1999.
There are some interesting numbers in here. All the manufacturing/production/inventory numbers are down. If/when demand picks up, which one would expect if the vaccinations control the C19, then (look right to the Inflation data) the ECRI number, already showing signs of heating up, could get a lot warmer. Add that falling dollar and we are already seeing in commodities, that they are rising (pretty much) across the board.
Just reinforcing 'sentiment'. The PUT/CALL ratio however is demonstrated bullishness.
Companies continue to float new debt. Money supply going ever higher. Combine that with low inventory levels and you can see that potentially that can flow into CAPEX, which drives commodity prices higher. The other use of course is the repurchase of your own stock, pumping your earnings/share. It also places a nice bid under the market.
Speaks for itself.
A year ago, unknown to many, the market was already in dire straits. The collapse came in Feb. The bears were right. Currently we are 50% of that total. This is a number worth keeping an eye on, because:
There is a major divergence. We have had some really minor declines in the last 2+ weeks, but nothing that has taken hold. As you can see, sometimes it takes a little while for the divergence to work itself out and result in a market fall. Under-the-hood, something is going on. What, might only come out after the fact and a market decline.
We have also had a couple of false starts in the VIX.
Final word: flippe-floppe-flye:
jog on
duc
In no particular order:
Sentiment remains bullish. However (as we shall see later, therein lies a warning). Dollar falling against Euro (which I track) and the Yen, which more or less mirrors the Euro. Obviously has inflationary implications.
With gold highs/lows since 1999.
There are some interesting numbers in here. All the manufacturing/production/inventory numbers are down. If/when demand picks up, which one would expect if the vaccinations control the C19, then (look right to the Inflation data) the ECRI number, already showing signs of heating up, could get a lot warmer. Add that falling dollar and we are already seeing in commodities, that they are rising (pretty much) across the board.
Just reinforcing 'sentiment'. The PUT/CALL ratio however is demonstrated bullishness.
Companies continue to float new debt. Money supply going ever higher. Combine that with low inventory levels and you can see that potentially that can flow into CAPEX, which drives commodity prices higher. The other use of course is the repurchase of your own stock, pumping your earnings/share. It also places a nice bid under the market.
Speaks for itself.
A year ago, unknown to many, the market was already in dire straits. The collapse came in Feb. The bears were right. Currently we are 50% of that total. This is a number worth keeping an eye on, because:
There is a major divergence. We have had some really minor declines in the last 2+ weeks, but nothing that has taken hold. As you can see, sometimes it takes a little while for the divergence to work itself out and result in a market fall. Under-the-hood, something is going on. What, might only come out after the fact and a market decline.
We have also had a couple of false starts in the VIX.
Final word: flippe-floppe-flye:
jog on
duc
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Remember how you mentionned tesla as a narrative stock?
Based on numbers and facts, covid is also a narrative and with vaccines, the narrative changes.So within a months or two, the inflation will start:
Market will so be able to get bullish, and gold commodities will win: pushed by both demand and inflation.
As i see it, a last limited drawback with a few more alarmist headlines to ensure government control, then a serious bull market with inflationary forces until such time that central banks need to rise rates so stalling the bull move.
I would look at the sign of the drawback in the coming weeks..usually post NY, or just ride it looking at the 6 months or year at least of blue sky beyond.
also feel confident with gold and so BTC in the near /medium term which could be a smoother ride.
Am i off track?
Have all a great week end and thanks for providing these data gems
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