Trading the Trend

[ducati916]

And this is the issue: your arguments are incoherent.

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duc

 

[ducati916]

For a healthy market, all sectors need to contribute:

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duc

 

[ducati916]

In the last month:

In the last 3

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duc

 

[over9k]

View attachment 106724

You stated you were (trained) in Austrian economics. This is Austrian economics. So we can simply move on. There is no point in trying to engage in a discussion/analysis of Austrian theory when clearly you do not really have a grasp of Austrian theory (economics) at all.

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duc

View attachment 106738
View attachment 106737

And this is the issue: your arguments are incoherent.

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duc

No they're not. You just keep putting words in my mouth, and then responding to your own misinterpretation. The very definition of strawman.

Considering your consistent failure to understand what I am saying, I'd suggest checking your ego. It's not lost on me that every time I defeat your thesis or point(s) you just ignore it and only respond to the stuff that you think you can misrepresent.

If you genuinely think that I said what you claim I said (or didn't) then you are even dumber than I thought.

You strike me as a 2nd year uni student deploying the blindingly obvious tactic(s) of trying to shift the focus, muddy the waters, deliberate strawmanning, or even simply assert just straight up bull**** when you've been called out whilst trying to make yourself sound clever. The dead giveaway for any child doing this is always dumping (hurr durr look at all this stuff I know. I mean it has nothing to do with what we're talking about, but I'm letting you know I know it so you can see how clever I am) and the other big one, namedropping, and you just did a ton of it.

You are as mistaken as you are transparent.

 

[over9k]

Let this be a lesson kids:

The moment someone starts namedropping (in ANY kind of debate), you know you're dealing with someone "really clever". The next thing they'll do is try to lead the discussion on to some tiny esoteric absolutely specific BS thing that they've deliberately memorised for the sole purpose of leading the discussion to it to attempt a "gotcha" when you don't know that one tiny (usually irrelevant) thousandth of the topic that they do.

It is hopelessly transparent if you know what you're looking for.

 

[qldfrog]

Let this be a lesson kids:

The moment someone starts namedropping (in ANY kind of debate), you know you're dealing with someone "really clever". The next thing they'll do is try to lead the discussion on to some tiny esoteric absolutely specific BS thing that they've deliberately memorised for the sole purpose of leading the discussion to it to attempt a "gotcha" when you don't know that one tiny (usually irrelevant) thousandth of the topic that they do.

It is hopelessly transparent if you know what you're looking for.

With all due respect, where was the name dropping?

 

[Beaches]

Sometimes its amazing how much truth there is in old cliches. What comes to mind currently is - Empty vessels make the most noise

 

[ducati916]

So at week's end, this is how we look:

Just your bog standard chart/indicator. SPY is near the all time high. Next week will see the assault. Will it succeed first go or need a couple of bites at the cherry?

The 20's could support the assault, just as easily they might not. Sitting in no-man's land currently.

Much more positive from the 50's. They are close(er) to support and are ready once again to lead the charge.

My tie breaker, slightly closer to support than resistance, so I think we go at it early in the week and 1 of 2 things may happen:

(a) we break through to new all time highs and then test that level as support, or
(b) fail at first attempt and pullback, which will sound a massive chorus from the Bears.

Either way, all we are arguing about is when we break through, not whether. ATM the trend is intact and the fundamentals across all sectors are improving. There are patches of bad news and they might drive sentiment on the day, bearish sentiment that creates a losing day will unlikely see much (if any follow through) and the bulls will grab it back.

Vol:

Is still elevated (by historical norms) but dropping. It looks as if (top chart) daily Vol is now contained by that resistance line, which means on a purely technical level, we won't get a jump in Vol, which means any pullbacks will be minor. The only caveat (as always) if something really unexpected falls out of the tree, a little red line on a chart will mean absolutely zero.

Everyone seems to think 'virus' news is a thing. The virus is a non-issue for the market. It may well be a political issue. It may well be a social issue. It is not and never was apart from in Feb. a market issue. The 1918/19 Flu killed 50M-100M. No one cared. That was after whatever loss of life was already incurred in WWI. Further, there was no lockdown. The virus burned itself out. That is the way of a flu based virus. They mutate so quickly, that the original virus that existed in Feb no longer exists today.

jog on
duc

 

[qldfrog]

I like a breath of fresh sir indeed
Thanks Le Duc

So at week's end, this is how we look:

View attachment 106746 View attachment 106747

Just your bog standard chart/indicator. SPY is near the all time high. Next week will see the assault. Will it succeed first go or need a couple of bites at the cherry?


View attachment 106750

The 20's could support the assault, just as easily they might not. Sitting in no-man's land currently.

View attachment 106751

Much more positive from the 50's. They are close(er) to support and are ready once again to lead the charge.

View attachment 106748 View attachment 106749

My tie breaker, slightly closer to support than resistance, so I think we go at it early in the week and 1 of 2 things may happen:

(a) we break through to new all time highs and then test that level as support, or
(b) fail at first attempt and pullback, which will sound a massive chorus from the Bears.

Either way, all we are arguing about is when we break through, not whether. ATM the trend is intact and the fundamentals across all sectors are improving. There are patches of bad news and they might drive sentiment on the day, bearish sentiment that creates a losing day will unlikely see much (if any follow through) and the bulls will grab it back.

Vol:

View attachment 106752 View attachment 106753

Is still elevated (by historical norms) but dropping. It looks as if (top chart) daily Vol is now contained by that resistance line, which means on a purely technical level, we won't get a jump in Vol, which means any pullbacks will be minor. The only caveat (as always) if something really unexpected falls out of the tree, a little red line on a chart will mean absolutely zero.

Everyone seems to think 'virus' news is a thing. The virus is a non-issue for the market. It may well be a political issue. It may well be a social issue. It is not and never was apart from in Feb. a market issue. The 1918/19 Flu killed 50M-100M. No one cared. That was after whatever loss of life was already incurred in WWI. Further, there was no lockdown. The virus burned itself out. That is the way of a flu based virus. They mutate so quickly, that the original virus that existed in Feb no longer exists today.

jog on
duc

 

[Lucky777]

Respect duc. Motivates me to study further. Thanks for the hard work!

 

[qldfrog]

I like a breath of fresh sir indeed
Thanks Le Duc

Fresh air..oops

 

[ducati916]

If you study Austrian economics, then Bohem-Bawerk, von Mises and Rothbard are names that will be very familiar to you. Add Hayek, Hoppe and De Soto to that list and you have the intellectual contributors that pretty much define Austrian economics.

So Austrians define the natural rate of interest as the marginal efficiency of capital, or, the net profit of the business. What we are looking at therefore is: what is the aggregate net profit of a sector, or market, or individual firm. Since this thread is about the trend of the market and primarily the S&P500, what is the aggregate profit of the index? Is it above or below the current Fed Discount rate?

So data from 1953

So we can see the long term inflation rate is 3.43% via CPI data. Market at that rate of inflation has increased in value, earnings both nominally and in real terms. Dividends are clearly very important to total returns.

So now what is the profitability of the aggregate?

If we called the average profitability 7% of the S&P500 over that time period, that wouldn't be far off (my best glance across the chart). That allows for under/over performance over time.

So the natural rate of interest (on average) is 7%. Currently (as per Q1 2020) it is 8% (slightly above our long term average). The 10yr Bond currently yields 0.55%. This is far below our natural rate of interest.

What then is the effect? Most (many) will argue, certainly Schiff et al. that this is inflationary.

Paradoxically (I would argue) that it is the opposite: it is disinflationary, as would an Austrian analysis. The reasons are as follows:

(a) Prior to the crash in Fed. there was $14T in BBB rated Corporate debt (junk) that would have largely defaulted. Let us say that $7T would have defaulted. That is an overnight $7T contraction in credit or the money supply. That is deflation and very dangerous. The Fed. stepped in and propped up that market. Possibly $500B in the oil patch has defaulted. That is still a problem, but a much smaller problem. A problem that the Banks can handle.

(b) The result of no outright deflation, via insolvencies, defaults, etc. means that we have a lot of firms still in business that really shouldn't be in business because they are not profitable. Being non-profitable means they don't hit our hurdle rate for natural rate of interest at 7%. Not even close. They should go out of business. If they do (as is happening in the oil patch) supply is reduced. Resources are freed up for more profitable firms. Capital is freed up for more profitable re-investment. None of these things are happening. We have zombie firms churning out products at grossly reduced prices, because they can borrow at 0.55% and just hang on. This is disinflationary. Employment is always a political hot potato, particularly in an election year and in addition it is one of the Fed's mandates.

So we end up with the bizarre conclusion that the Fed Funds rate at 0.09% gives rise to a very steep yield curve that is disinflationary.

jog on
duc

 

[ducati916]

Nothing new under the sun.

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duc

 

[ducati916]

If you are a gold bull:

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duc

 

[ducati916]

This is exactly what used to happen in 1999, a stock split, that stock would run. It's back baby!

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duc

 

[ducati916]

Fan of Buffett?

The trade:

Sell Sept. 18 PUTs at $25 @ $1.50 (from Barrons).

Thinking on it.

jog on
duc

 

[ducati916]

Ton of news in the oil patch:

Friday, July 31st, 2020

Oil prices retreated on Thursday after the U.S. posted a horrific second quarter GDP figure. Prices steadied in early trading on Friday, pushing crude benchmarks back to familiar territory – roughly $40 for WTI and $43 for Brent.

ExxonMobil posts huge $1.1 billion loss. ExxonMobil (NYSE: XOM) reported a loss of nearly $1.1 billion, the largest quarterly loss in 36 years. Production was down 7 percent, year-on-year. Exxon said its working on cost-cutting plans in a “last ditch” effort to preserve its dividend. and CEO Darren Woods said that the company would not take on more debt.

Chevron announces worst loss in three decades. Chevron (NYSE: CVX) reported an adjusted loss of $3 billion, along with an impairment of $5.6 billion. That included writing off Chevron’s entire unit in Venezuela, worth about $2.6 billion. “We would need to see sustained economic recovery and much lower inventory levels before we would add capital back to the Permian or other basins,” Pierre Breber, Chevron’s finance chief, told Reuters. “We’re in a lower for longer world where demand is down and there’s ample supply.”

Occidental in talks to sell Africa and Middle East assets. Occidental Petroleum (NYSE: OXY) is in talks with Indonesia’s state-owned PT Pertamina over the sale of Oxy’s Middle East and African assets. The price could be around $4.5 billion, according to Bloomberg.

Indian refiners cut runs on sinking demand. Refiners in India have reduced processing over flagging demand. High retail fuel prices and rising coronavirus numbers have weakened consumption. For example, Bharat Petroleum Corp (BPCL.NS) is operating its three refineries at about 70 percent capacity compared to about 90 percent in early June, according to Reuters.

Exxon and Hess make another Guyana discovery. ExxonMobil (NYSE: XOM) and Hess (NYSE: HES) said that they made yet another discovery in Guyana, adding to their more than one dozen previous discoveries. “This additional resource is currently being evaluated and will help form the basis for a potential future development,” Hess said.

Total takes $8 billion write-down. Total (NYSE: TOT) wrote down $8 billion in assets, $7 billion of which was in Canada’s oil sands. Total also said that it conducted an assessment over its stranded asset risk, meaning with reserves beyond 20 years and high production costs. Canadian oil sands ran afoul of this test, and Total said it would no longer invest in oil sands.

Dakota Access dampens Bakken prospects. The potential loss of the Dakota Access pipeline could stall the North Dakota shale formation’s rebound. Moving oil by rail would add $3 to $6 in costs for producers. Anecdotally, some companies are holding off on drilling until they know more about the fate of Dakota Access, according to Reuters.

Tokyo Gas to spend $657 million on U.S. shale. Tokyo Gas Co Ltd said it would spend $657 million to acquire Castleton Resources, as well as to buy a solar project. “As U.S. shale gas prices have fallen sharply, we think it is a good time to buy stake in gas assets at a relatively cheap price,” said Koji Yoshizaki, senior general manager of Tokyo Gas.

AMLO considers reversing energy reform. Mexican President Andres Manuel Lopez Obrador suggested that he might pursue rolling back the country’s historic energy reform passed under his predecessor, which opened up the oil and gas sector to international investment.

U.S. LNG faces long-term challenges. China may not deliver on long-term LNG trends, which poses risks to U.S. export projects, according to a new report. “A China-led rebound for the U.S. LNG industry will face stiff price resistance from Chinese buyers,” the report says. U.S. LNG may need prices of $8/MMBtu in China over the long-term to be profitable, while prevailing city-gate prices are trading at right around those levels, leaving an exceedingly narrow margin for exporters.

Trump admin approves Keystone capacity expansion. The Trump administration granted approval to TC Energy’s (NYSE: TRP) Keystone pipeline to expand throughput to 760,000 bpd, up from the current 590,000 bpd.

Saudi Arabia to unveil September prices amid market pressure. Saudi Arabia is under pressure to lower the price of its oil, according to Bloomberg. Traders expect a price cut for the first time since April. Saudi prices typically set the tone for the market, so the unveiling of prices for September in the next few days will offer clues into the market direction.

Apache and Total make offshore Suriname discovery. Apache (NASDAQ: APA) and Total (NYSE: TOT) announced a third “substantial” light oil and condensate discovery in Suriname. “These very encouraging results confirm our exploration strategy in this prolific zone, which targets large volumes of resources at low development costs,” Total said in a statement.

Canadian drilling forecast cut again. Canada is on track to drill 2,800 wells this year, according to the Petroleum Services Association, the third downward revision for the group. Last year, the industry drilled 4,900 wells.


jog on
duc

 

[qldfrog]

Ton of news in the oil patch:

Friday, July 31st, 2020

Oil prices retreated on Thursday after the U.S. posted a horrific second quarter GDP figure. Prices steadied in early trading on Friday, pushing crude benchmarks back to familiar territory – roughly $40 for WTI and $43 for Brent.

ExxonMobil posts huge $1.1 billion loss. ExxonMobil (NYSE: XOM) reported a loss of nearly $1.1 billion, the largest quarterly loss in 36 years. Production was down 7 percent, year-on-year. Exxon said its working on cost-cutting plans in a “last ditch” effort to preserve its dividend. and CEO Darren Woods said that the company would not take on more debt.

Chevron announces worst loss in three decades. Chevron (NYSE: CVX) reported an adjusted loss of $3 billion, along with an impairment of $5.6 billion. That included writing off Chevron’s entire unit in Venezuela, worth about $2.6 billion. “We would need to see sustained economic recovery and much lower inventory levels before we would add capital back to the Permian or other basins,” Pierre Breber, Chevron’s finance chief, told Reuters. “We’re in a lower for longer world where demand is down and there’s ample supply.”

Occidental in talks to sell Africa and Middle East assets. Occidental Petroleum (NYSE: OXY) is in talks with Indonesia’s state-owned PT Pertamina over the sale of Oxy’s Middle East and African assets. The price could be around $4.5 billion, according to Bloomberg.

Indian refiners cut runs on sinking demand. Refiners in India have reduced processing over flagging demand. High retail fuel prices and rising coronavirus numbers have weakened consumption. For example, Bharat Petroleum Corp (BPCL.NS) is operating its three refineries at about 70 percent capacity compared to about 90 percent in early June, according to Reuters.

Exxon and Hess make another Guyana discovery. ExxonMobil (NYSE: XOM) and Hess (NYSE: HES) said that they made yet another discovery in Guyana, adding to their more than one dozen previous discoveries. “This additional resource is currently being evaluated and will help form the basis for a potential future development,” Hess said.

Total takes $8 billion write-down. Total (NYSE: TOT) wrote down $8 billion in assets, $7 billion of which was in Canada’s oil sands. Total also said that it conducted an assessment over its stranded asset risk, meaning with reserves beyond 20 years and high production costs. Canadian oil sands ran afoul of this test, and Total said it would no longer invest in oil sands.

Dakota Access dampens Bakken prospects. The potential loss of the Dakota Access pipeline could stall the North Dakota shale formation’s rebound. Moving oil by rail would add $3 to $6 in costs for producers. Anecdotally, some companies are holding off on drilling until they know more about the fate of Dakota Access, according to Reuters.

Tokyo Gas to spend $657 million on U.S. shale. Tokyo Gas Co Ltd said it would spend $657 million to acquire Castleton Resources, as well as to buy a solar project. “As U.S. shale gas prices have fallen sharply, we think it is a good time to buy stake in gas assets at a relatively cheap price,” said Koji Yoshizaki, senior general manager of Tokyo Gas.

AMLO considers reversing energy reform. Mexican President Andres Manuel Lopez Obrador suggested that he might pursue rolling back the country’s historic energy reform passed under his predecessor, which opened up the oil and gas sector to international investment.

U.S. LNG faces long-term challenges. China may not deliver on long-term LNG trends, which poses risks to U.S. export projects, according to a new report. “A China-led rebound for the U.S. LNG industry will face stiff price resistance from Chinese buyers,” the report says. U.S. LNG may need prices of $8/MMBtu in China over the long-term to be profitable, while prevailing city-gate prices are trading at right around those levels, leaving an exceedingly narrow margin for exporters.

Trump admin approves Keystone capacity expansion. The Trump administration granted approval to TC Energy’s (NYSE: TRP) Keystone pipeline to expand throughput to 760,000 bpd, up from the current 590,000 bpd.

Saudi Arabia to unveil September prices amid market pressure. Saudi Arabia is under pressure to lower the price of its oil, according to Bloomberg. Traders expect a price cut for the first time since April. Saudi prices typically set the tone for the market, so the unveiling of prices for September in the next few days will offer clues into the market direction.

Apache and Total make offshore Suriname discovery. Apache (NASDAQ: APA) and Total (NYSE: TOT) announced a third “substantial” light oil and condensate discovery in Suriname. “These very encouraging results confirm our exploration strategy in this prolific zone, which targets large volumes of resources at low development costs,” Total said in a statement.

Canadian drilling forecast cut again. Canada is on track to drill 2,800 wells this year, according to the Petroleum Services Association, the third downward revision for the group. Last year, the industry drilled 4,900 wells.


jog on
duc

I own xom and not unhappy with the overall results above

 

[Garpal Gumnut]

Thanks @qldfrog and @ducati916

Saudi Arabia seems to be the wildcard in all of this. Political instability is imminent and either a decrease in oil supply or a massive oversupply. The latter more likely. Then again, oils is oils.

gg

 

[ducati916]

I own xom and not unhappy with the overall results above

Not totally unexpected. XOM and the rest will regain lost ground, particularly now that Shale is in such a mess.

jog on
duc