Euphoria over the weekend. On Friday the DOW close way up and oil was over $30 a barrel. There were whispers that the point at which the DOW as down over 500 on Wednesday was THE bottom and it was time to start picking up bargains. Today ended that and we saw a rather curious thing: if you charted the movement of equities and the price of oil today it seemed that there was one line. Not good. Is the stock market is linked to the price of oil it ain't goin' nowhere fast because oil is going to be at this level for a while. Oil closed under 30: The DOW was down over 200.
Did I believe it? Not really. The decline in energy cost was supposed to be a huge boost for the economy; it has done little if anything. As Bill Clinton said way back when, "It's the economy, stupid," not oil that matters and this economy, as I keep saying, is no where near being as robust as those out there would have you believe. What we have is a game of three card Monte played by the Central Banks of the world who (correctly) bet that they could fake everyone out with a flood of liquidity for the last 8 years...and before...if the truth be known.
Now some would say that reaching unemployment of just 5% was worth the price. Rubbish. How, may I ask, can a labor market be this tight and yet hourly wages have remained essentially flat? It cannot unless one ignores the fact that 30% of our work force is not seeking work which is the case. Corporate profits are up but is there top line growth? We are about to find out this week that there is very little I suspect. We are also beginning to discover that We Are Not Alone. We may export but 2% of our GDP to China but if China stops, Asia stops and a lot of other places as well. Europe has allowed of a million and a half people to enter its borders without a thought of what do do with them and they are now paralyzing nearly all governmental intercourse. New investment? Not really, unless one counts American companies re-registering to avoid the world's stupidest tax code. And as some of this begins to sink in, today arose a new theory as to who is at fault--after all, there HAS to be someone to blame.
The FED, that's who! They never should have tightened! No one believes that they know what they are doing anymore! Well, there are some who believe that they never really did but the one true thing that comes out of all of this is that they are now a Fed without a cause. Whatever they do...or say...will thrash the markets so they will say nothing which will be, while sad, the right thing. Folks are going to have to work this one out by themselves without any help from Granny Janet which may not be a bad thing, and if the Government(s) Over Here and especially Over There start asking themselves if they have gotten this thing right, THAT would be a good thing. Then again, we have Bernie Sanders suggesting that we add a dose of real socialist steroids to our current path of government as the solution to our problems. Feel the Bern. Oh, it will burn all right.
Showing posts with label oil prices. Show all posts
Showing posts with label oil prices. Show all posts
Monday, January 25, 2016
Wednesday, January 14, 2015
COINCIDENCE
Back in the last century, when we were very young, both T & S and I were in the information gathering business, me with the military and she with...ah...a branch of the government. In that business you learn very quickly that there is no such thing as a coincidence but if you actually run across a real one the next thing to look for is a hen with teeth. So I must say that I look at the exquisite timing of the Saudi's decision to "protect their markets" by pumping merrily away just when the Russians are causing all sorts of grief in Europe and the Iranians have jumped into the mess that is Syria and Iraq with both feet with somewhat of a jaundiced eye. Oh yeah, let's not forget that it's exactly the same moment that the gusher in new oil as a result of the--up until now--phenomenally successful shale drilling effort in the U.S. has come to fruition. Coincidence you say? Anybody see a hen?
I spoke with He Who Knows All Things about this the other day and as usual we were in agreement. But as we talked, one thing kept nagging us. Who put this deal together and if the fix is in how come there is zip, nada, nothing out there and even more surprising, no one speculating about this.
HWKAT: "That's the funny thing about this, there isn't a word in D.C. concerning it. That is simply impossible in that town with a matter so important."
ME: "Particularly with the risks swirling around the the entire sector. It seems to me that there has to be somebody thinking that if this continues for a period of time, it could really get nasty in a financial sense. Surly a deal like this couldn't have been done without a couple of committees on the Hill being briefed."
HWKAT: "I doubt that as well, but there's another explanation."
ME: (smiling) "We know each other too well. Maybe there's nothing to talk about."
HWKAT: "Yup. You really have to ask yourself whether this mob could dream something up like this on their own. Then there's the fact that the Saudis loath our guy to the point that it would be really hard for them to view it from their usual pragmatic approach. Then if you think about it it might serve their interests far better to simply cut production, but no, they pull this, that no one expected right out of a hat."
ME: "Another problem. Do you think our guys have made a full risk analysis of this?"
HWKAT: Not a chance. There would have been rumblings. Not at Treasury either. Across the river, maybe, but they're talking to nobody at this stage."
ME: " One thing I'm sure of, the House of Saud didn't do this one alone nor did they do it without something coming in return. But who? All the Euros or just a select few if any? Or do we get really James Bondie and blame it on what's left of the Seven Sisters. Gotta say, it's been damn effective up to now."
HWKAT: "Maybe it's just a coincidence."
ME: "Cluck, cluck."
I spoke with He Who Knows All Things about this the other day and as usual we were in agreement. But as we talked, one thing kept nagging us. Who put this deal together and if the fix is in how come there is zip, nada, nothing out there and even more surprising, no one speculating about this.
HWKAT: "That's the funny thing about this, there isn't a word in D.C. concerning it. That is simply impossible in that town with a matter so important."
ME: "Particularly with the risks swirling around the the entire sector. It seems to me that there has to be somebody thinking that if this continues for a period of time, it could really get nasty in a financial sense. Surly a deal like this couldn't have been done without a couple of committees on the Hill being briefed."
HWKAT: "I doubt that as well, but there's another explanation."
ME: (smiling) "We know each other too well. Maybe there's nothing to talk about."
HWKAT: "Yup. You really have to ask yourself whether this mob could dream something up like this on their own. Then there's the fact that the Saudis loath our guy to the point that it would be really hard for them to view it from their usual pragmatic approach. Then if you think about it it might serve their interests far better to simply cut production, but no, they pull this, that no one expected right out of a hat."
ME: "Another problem. Do you think our guys have made a full risk analysis of this?"
HWKAT: Not a chance. There would have been rumblings. Not at Treasury either. Across the river, maybe, but they're talking to nobody at this stage."
ME: " One thing I'm sure of, the House of Saud didn't do this one alone nor did they do it without something coming in return. But who? All the Euros or just a select few if any? Or do we get really James Bondie and blame it on what's left of the Seven Sisters. Gotta say, it's been damn effective up to now."
HWKAT: "Maybe it's just a coincidence."
ME: "Cluck, cluck."
Tuesday, January 13, 2015
BEST BUCKLE UP
It was a wild ride today with equities swinging over 400 points during the course of the session. It started off great but soon the word was bonds are the place to be (again) after a rather lackluster auction in which successful bidders were probably wishing they were somewhere else at the end of the session.
There is an old adage that you don't but the dips in the bond market. Bonds go up and bonds go down; and when they go down they go DOWN. Given the state of the world discussed last week I don't think bonds are going down anytime soon. But I did spend a good deal of time the past few days speaking with folks about the credit issues surrounding the energy sector which have contributed to this overall flight to safety and for once the answers I received were actually what I expected.
There's a good deal of blood in the water but the biggest area of concern, the banks, are not the ones doing the bleeding at least not yet although the feeling is that they got this one right. A good deal of private equity has been lost; certain hedge funds have taken a terrific beating and the high yield guys have gotten slaughtered. But the banks--the Citis and J.P.Morgans of the world have remained on the fringes of the shale boom and stuck with their traditional clients whose P & Ls aren't going to look great at year end but who are basically stable. Now comes the interesting part and let me emphasize that I'm merely relating tales-told because the only thing I know about the energy business is how to lose money because of it.
My guys tell me that the shale phenomena is real but not to the extent it has been hyped. The reserves, once estimated at astronomical numbers are not there and as one member of a mid major put it, "if you're in the Bakken you had better be in the right place otherwise you have a problem...at 50 bucks you have a BIG problem," whilst a Texas bud of mine called to ask if I was interested in a brand new Mac-Mansion in Midland...cheap. I told him these days cheap means free but thanks for the thought.
So it would appear that those good ol' boys that levered up and got in late might just suffer the same sort of fate that so many of heir predecessors suffered, but a systemic problem? I doubt it, except...
Nobody is real sure how these plays were financed but in general there was a lot of high yield debtunderwritten and whether all or substantially all of that got distributed is anybody's guess. There is a pretty strong suspicion that it did not and there may be some houses that are wearing it. If it turns out there's a big house or even an middle sized one, it's going to be very important that the regulators make sure this doesn't turn into a 2008 situation where people suddenly decide that one bad all bad and head for the exits. One would think that at this stage that should not be a major concern but with this mob one can never be sure. If it's more than one...well then it becomes very important as to who they are and again, the manner in which the regulator deal with it. In short, I don't think we are facing a melt-down scenario but there's a reason the bond market is all bid and is going to stay that way for a while--aside from the well known problems among international producers...bless their pointed heads.
More about that tomorrow because I've gone as far as I can today. Saw the doc yesterday and I required more laser surgery in my "good" eye. Bummer. He's says not to worry but it really plays with your head. I keep telling him I'm seeing double and he keeps telling me "seeing" is the operative word. When a guy's right he's right.
There is an old adage that you don't but the dips in the bond market. Bonds go up and bonds go down; and when they go down they go DOWN. Given the state of the world discussed last week I don't think bonds are going down anytime soon. But I did spend a good deal of time the past few days speaking with folks about the credit issues surrounding the energy sector which have contributed to this overall flight to safety and for once the answers I received were actually what I expected.
There's a good deal of blood in the water but the biggest area of concern, the banks, are not the ones doing the bleeding at least not yet although the feeling is that they got this one right. A good deal of private equity has been lost; certain hedge funds have taken a terrific beating and the high yield guys have gotten slaughtered. But the banks--the Citis and J.P.Morgans of the world have remained on the fringes of the shale boom and stuck with their traditional clients whose P & Ls aren't going to look great at year end but who are basically stable. Now comes the interesting part and let me emphasize that I'm merely relating tales-told because the only thing I know about the energy business is how to lose money because of it.
My guys tell me that the shale phenomena is real but not to the extent it has been hyped. The reserves, once estimated at astronomical numbers are not there and as one member of a mid major put it, "if you're in the Bakken you had better be in the right place otherwise you have a problem...at 50 bucks you have a BIG problem," whilst a Texas bud of mine called to ask if I was interested in a brand new Mac-Mansion in Midland...cheap. I told him these days cheap means free but thanks for the thought.
So it would appear that those good ol' boys that levered up and got in late might just suffer the same sort of fate that so many of heir predecessors suffered, but a systemic problem? I doubt it, except...
Nobody is real sure how these plays were financed but in general there was a lot of high yield debtunderwritten and whether all or substantially all of that got distributed is anybody's guess. There is a pretty strong suspicion that it did not and there may be some houses that are wearing it. If it turns out there's a big house or even an middle sized one, it's going to be very important that the regulators make sure this doesn't turn into a 2008 situation where people suddenly decide that one bad all bad and head for the exits. One would think that at this stage that should not be a major concern but with this mob one can never be sure. If it's more than one...well then it becomes very important as to who they are and again, the manner in which the regulator deal with it. In short, I don't think we are facing a melt-down scenario but there's a reason the bond market is all bid and is going to stay that way for a while--aside from the well known problems among international producers...bless their pointed heads.
More about that tomorrow because I've gone as far as I can today. Saw the doc yesterday and I required more laser surgery in my "good" eye. Bummer. He's says not to worry but it really plays with your head. I keep telling him I'm seeing double and he keeps telling me "seeing" is the operative word. When a guy's right he's right.
Thursday, January 27, 2011
BACK TO WHAT'S GOING TO MATTER
Certainly nothing that was in The Speech Tuesday night. The Leader, for all the hopes of future years, is a committed Socialist/Leftist/Big Govvie Guy, call him whatever you wish, with the understanding that there is nothing wrong with being a proponent of any of those things except that for the most part events have proven they don't work very well--or at least in my opinion. So, what we can expect from here is a knock down, drag-out fight up to the election of 2012 between the right and the left with little being accomplished, the economy lumbering forward, unemployment remaining in the 9% range, housing stinko, and a general funk settling over the business climate which will overwhelm the momentary good feels brought about by the results of last year's election (make no mistake, it was the results that brough about the pop in confidence) with the knowledge that the only the The Leader cares about is getting reelected. He might just do it as no strong opposition has yet emerged. Then again, things could go south in a hurry which could change the game entirely. Might happen, too.
Inflation, despite the administration's claims and the view of the Fed is real. Oh, not in the official numbers but in the tape from the cash register folks get when their weekly shopping is over. Jimmy Rogers was on the horn the other day predicting $150-$200 oil. Rogers is not a dope. To supply ethonol to the level of 15% which will kill my 1993 Acura has already had an effect on food prices: we compete with China and India for most commodities now...hello; interest rates on the rise despite QE II and dare we mention the looming muni situation?
We dare. Today, Moody's announced that they would begin to consider the pension overhang on the states' credit ratings. For the usual suspects, that can't be good but the dummies at Moody's are about to get in wrong again. Rather than making their own assumptions in regard to the reinvestment rates from which shortfalls or surpluses are calculated, they intend to accept the states' evaluations at face value. Remember 2008? There was some question as I recall as to the valuation of certain assets held on the books of various financial institutions around the world. The institutions felt it was 100...others felt it was somewhat below that figure and that's when the problem started. In merely highlighting this issue, Moody's will spotlight it which is not particularly useful but then again, no one ever clainmed these guys were very smart. Right at the time when Illinois is planning to raise a few billion here and there to fund its pensions plans for the year. Ya gotta wonder. My father used to say, "Do it right or don't do it at all." Moody's never met my father.
Paul Ryan seems to be the point guy for the Loyal Opposition which is good because he's nobody's fool. I would, however, like to see him attack our dreadful fiscal shape with an all out assault upon the tax code rather than messing about the edges as he seems to be doing. Is there no support in his own party for this? I frankly don't understand because all of the logical arguments seem to be supportive of this goal. Is it because once one scratches off the red or the blue one winds up with the same politician underneath? Ya gotta wonder.
Finally, did anyone notice that the other night The Leader barely mentioned the views of the Bowles/Wyoming Win Nut Commission that he himself handpicked, and there was barely a mention of that fact in the mainstream media or anywhere else for that matter? They actually came up with a few good ideas and yet the Commission has been cast aside as though it never happened. Ya gotta wonder. I'm going to do just that.
Inflation, despite the administration's claims and the view of the Fed is real. Oh, not in the official numbers but in the tape from the cash register folks get when their weekly shopping is over. Jimmy Rogers was on the horn the other day predicting $150-$200 oil. Rogers is not a dope. To supply ethonol to the level of 15% which will kill my 1993 Acura has already had an effect on food prices: we compete with China and India for most commodities now...hello; interest rates on the rise despite QE II and dare we mention the looming muni situation?
We dare. Today, Moody's announced that they would begin to consider the pension overhang on the states' credit ratings. For the usual suspects, that can't be good but the dummies at Moody's are about to get in wrong again. Rather than making their own assumptions in regard to the reinvestment rates from which shortfalls or surpluses are calculated, they intend to accept the states' evaluations at face value. Remember 2008? There was some question as I recall as to the valuation of certain assets held on the books of various financial institutions around the world. The institutions felt it was 100...others felt it was somewhat below that figure and that's when the problem started. In merely highlighting this issue, Moody's will spotlight it which is not particularly useful but then again, no one ever clainmed these guys were very smart. Right at the time when Illinois is planning to raise a few billion here and there to fund its pensions plans for the year. Ya gotta wonder. My father used to say, "Do it right or don't do it at all." Moody's never met my father.
Paul Ryan seems to be the point guy for the Loyal Opposition which is good because he's nobody's fool. I would, however, like to see him attack our dreadful fiscal shape with an all out assault upon the tax code rather than messing about the edges as he seems to be doing. Is there no support in his own party for this? I frankly don't understand because all of the logical arguments seem to be supportive of this goal. Is it because once one scratches off the red or the blue one winds up with the same politician underneath? Ya gotta wonder.
Finally, did anyone notice that the other night The Leader barely mentioned the views of the Bowles/Wyoming Win Nut Commission that he himself handpicked, and there was barely a mention of that fact in the mainstream media or anywhere else for that matter? They actually came up with a few good ideas and yet the Commission has been cast aside as though it never happened. Ya gotta wonder. I'm going to do just that.
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