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Friday, February 22, 2008

Oil and Global Decoupling Theory

Oil Rises on Speculation Asia Demand to Withstand U.S. Slowdown: “Crude oil rose on speculation demand in Asia and the Middle East will withstand a U.S. economic slowdown.

Oil has lost 4.2 percent since touching a record $101.32 a barrel two days ago, as U.S. crude inventories rose and manufacturing data heightened concerns of a recession in the world's biggest energy user. Imports of crude by Japan, the third- largest oil consumer, rose for a fourth month in January, government data showed yesterday.

Prices were also supported today by shipping disruptions in the U.S. and North Sea, and heightened risks to oil supplies through renewed tensions in Iraq and Nigeria.

The Houston Ship Channel, which serves the largest U.S. petroleum port, remained closed for a second day to arriving tankers because of fog. The Houston area's eight refineries represent 13 percent of U.S. refining capacity, according to data from the plant owners and the National Petrochemical and Refiners Association.

“Demand from Indian and China is still booming, even at these prices, and appears at present to offset any slowdown from the western credit crunch,” said Rob Laughlin, senior broker at MF Global Ltd. in London.”


Related Posts:
Global Decoupling Theory, Correlation Contagion
The Global ‘Decoupling Theory’ is Garbage
Asia Tanks

Thursday, February 21, 2008

Bulls: Nothing But Failure, Again

U.S. Economy: Philadelphia Factory Index Declines (Update2): “The U.S. moved closer to a recession as manufacturing in the Philadelphia area shrank the most in seven years, while a measure of the economy's future performance declined for a fourth month.

The Federal Reserve Bank of Philadelphia's general economic index fell more than forecast this month to minus 24, showing the margin by which more firms reported a decrease in activity instead of an increase. That was the lowest figure since February 2001, weeks before the last downturn began. The Conference Board's index of leading indicators dropped 0.1 percent in January, matching December's decline.”

The MOST in SEVEN years.

“A two-year housing slump that has caused the first nationwide decline in prices since the Great Depression, coupled with higher borrowing costs for companies and households, has pushed the economy to the brink of a recession.”


“Economists had forecast the Philadelphia manufacturing index would rise to minus 10.0, according to the median of 54 estimates in a Bloomberg News survey. Eighty-five companies responded to this month's survey, which was taken from Feb. 6 to Feb. 18, said Philadelphia Fed spokeswoman Marilyn Wimp.”

Economists SUCK. So do analysts. They don’t have any ‘skin in the game’. They get fat salaries. They’re never ‘all in’ with their own bling. Therefore, they SUCK at predicting anything. It doesn’t matter if it is intentional or not. They simply suck as A RULE. Traders that are off by this much tend to blow their accounts. End of story AND end of rant against economists and analysts.

Oil Falls for a Second Day on Concern U.S. Demand to Decline: “Crude oil fell for a second day in New York on concern an economic slowdown in the U.S., the world's largest consumer, will lower global fuel demand.

Oil has reversed a push toward a record close of $100.74 a barrel on Feb. 20, falling 3 percent since then. Concern that the U.S. is sliding into a recession was heightened by the Federal Reserve Bank of Philadelphia's report that manufacturing in the area fell the most in seven years. Crude inventories rose to the highest since November, the Energy Department said yesterday.”

DUH. Sliding into a recession? ARE YOU SERIOUS? EVERY RECENT NUMBER has broken RECORDS on the BEARISH side… from Philly Fed to ISM Services. Fun stuff all around. How can you even consider getting long?

“U.S. service industries unexpectedly shrank in January at the fastest pace since the last recession as the housing slump deepened and consumer spending cooled.

The Institute for Supply Management's non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9, the lowest since October 2001, from 54.4 the prior month, the Tempe, Arizona-based ISM said. A reading of 50 is the dividing line between growth and contraction.”

Anyways, 1370 is holding (1368 to be EXACT). Serious tankage is more and more likely…

Related Posts:
Bounce Time, Again

Wednesday, February 20, 2008

Fed Losing: Rates Rise Again

I recently mentioned rising rates in Fed Cuts: Market Raises Rates

Looks like Mr. Market is giving the Fed a run for its money...

In the FOMC Minutes, the Fed said that participants agreed inflation data since the December meeting had been "disappointing", but that slow growth should relieve some of the pressures. Unbelievably, in the same breathe the Fed raised its core inflation forecast for 2008 to 2.0% -2.2% from 1.7%- 1.9%. The Fed also lowered its 2008 GDP forecast to 1.3% - 2.0% from 1.8% - 2.5% and raised its unemployment rate expectation to 5.2%-5.3% from 4.8%-4.9%.

Somehow this got the Bulltards out in full force and EVERYTHING, excluding fixed income, went bid. Equities. Commodities. Across the board.

A break above 1370 on the S&P would result in significant reduction of my Bearish positions, as this raises the possibility of a bounce to the 1390 area and beyond.

Related Headlines:
Fed Saw Need for Low Rates `For a Time,' Minutes Say (Update2)
Oil Rises Above $101 to Record on Increased Demand, Inflation
U.S. Economy: Housing Slump Fails to Quell Inflation (Update2)

Crude Hits $100, Equities Freak

The INSTANT crude hit $100 a barrel, equity markets freaked. The S&P dropped the least because it has component energy companies. Bottom line though: The economy is fragile and already in a recession. High crude prices can only hurt and hurt severely.

In my post Mr Danger, Chavez and Buffet I said I was looking to get short @ $95 and @97. The way oil moved, I actually managed to get short my $97 units @ $99. I am now fully short and somewhat offside. The stop is still $101.

Oil Falls From $100 Record on Speculation U.S. Stockpiles Grew: “Crude oil fell from a record $100.10 a barrel in New York on speculation that a U.S. Energy Department report will show stockpiles rose for a sixth week.

Oil prices declined as traders sold contracts to lock in profits from yesterday's 4.7 percent gain. Crude inventories probably climbed to 303.4 million barrels in the week ended Feb. 15 from 301.1 million barrels as heating-fuel use slows, according to responses in a Bloomberg survey.

“The factors that led us to believe that prices are going to come down are still there,” Lehman Brothers Holdings Inc.'s chief energy economist Edward Morse said in a Bloomberg television interview. “We're in the refinery maintenance season, crude oil inventories have been building not just in the U.S. but Europe.””

Now if only Iran, Venezuela and Nigeria would shut up for a couple of days…

Tuesday, February 19, 2008

These Are Some Of The Consequences

Massachusetts May Raise Road Tolls Amid Subprime Woes (Update1): “Drivers on the Massachusetts Turnpike face higher tolls because the state is unable to sell bonds insured by a unit of troubled Ambac Financial Group Inc.

The Massachusetts Turnpike Authority, which oversees Boston's `Big Dig' highway tunnels, is spending an additional $300,000 a month on its bonds because investors won't buy $126.7 million in auction-rate securities backed by Ambac, state officials revealed today. Rising debt costs threaten to derail agency efforts to avoid raising tolls this year, officials said.

The authority is now unable to sell $126.7 million in Ambac-backed bonds after the insurer's credit rating fell because of subprime-related debt it guaranteed, LeBovidge said. Additionally, the market for auction-rate debt has been roiled by bankers' reluctance to stand behind those bonds, causing auctions to fail.

The delay costs the turnpike an additional $300,000 a month because the $126.7 million in bonds are tied to an interest-rate swap with UBS AG that began in January. Officials are trying to rework the arrangement with different variable-rate securities to match the terms of the swap contract.”

This is what happens in the ‘real’ world when the financial markets get some sand in their gears.

Credit crunches ALWAYS result in economic crunches.
Short strength. Rallies are to be faded.
Nuff said.

Notice how the S&P couldn’t get through 1370 this morning? (I mentioned that level in Bounce Time, Again this morning.) Pop and drop. That’s the smart money selling into strength on the open.

Related Posts:
The Monolines: Such A Slow Death
Ambac, Monoline Insurer’s: The End Game

Bounce Time, Again