Australian (ASX) Stock Market Forum

DDD March 2024

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Oil News:

Friday, March 1st 2024

Diverging macroeconomic news, with China and Europe continuing to struggle with below-expectations manufacturing activity while the United States is nearing the point of first interest rate cuts, failed to alter the trading patterns of February, keeping Brent around the $83 per barrel mark. The next big thing to happen to the oil markets will be OPEC+ announcing the scrapping or the extension of voluntary production cuts next week, although the former seems to be highly unlikely at this point.

BP Doubles Down on Egyptian Upstream. UK energy major BP (NYSE:BP) is planning to invest some $1.5 billion in gas projects in Egypt over the next three to four years, eyeing joint upstream operations in three separate concessions with the UAE’s national oil firm ADNOC.

Market Expects US Sanction Hit on Russian Coal Exports. Indian importers of thermal fuel are widely expected to curb their purchases of Russian coal, up 20% year-on-year in 2023 at 10.06 million tonnes, after the US sanctioned Russia’s top coal exporters SUEK and Mechel.

Corn Sees Record Levels of Bearish Sentiment. Hedge funds and other money managers increased their net short position in CBOT corn futures to 340,732 contracts last week, the most bearish positioning ever on record, as global supplies of corn recovered from the chaos of 2023.

DoE Solicits Another 3 MMbbls SPR Refill. Having bought 2.95 million barrels of sour crude for an average price of 77.81 per barrel for June-delivery oil, the US Department of Energy announced a new solicitation for 3 million barrels to be delivered in July.

Canada Set to Expedite Nuclear Projects. Faced with an aging fleet of nuclear reactors and multi-year delays in project approvals for new uranium mines, Canada’s government vowed to expedite the approval process of both, however, insists that a federal environmental review will still be required.

Islands Ask for Exemption from EU Jet Fuel Taxes. With the EU starting to apply jet fuel taxes on all flights within the European continent, island nations such as Ireland, Cyprus, Greece, and Malta are asking for exemptions that would delay the launch of the levy until 2032.

Australia’s Mining Major Sells Met Coal Business. Australian mining giant South32 (ASX:S32) agreed to sell its Illawarra metallurgical coal business to the Indonesian GEAR holding for $1.65 billion, fully exiting coal to focus on an impending expansion into copper and zinc.

US Natural Gas Output Hits All-Time High in December. Gross US natural gas production from the lower 48 states soared to a record high in December, reaching 118.2 BCf per day, up 7% year-on-year as the Permian, Marcellus, and Utica basins have all continued their steady rise.

Venezuela Reinvents Its Barbados Deal with the US. As the White House mulls a sanction snapback, Venezuela’s top officials voiced their readiness to hold elections between May and December, despite top opposition candidate Maria Machado being banned from participating.

Glencore Emerges as Top Candidate for Shell’s Singapore Assets. Global commodities trader Glencore (LON:GLEN) is considering purchasing Shell’s 240,000 b/d Bukom oil refinery and the Jurong petchem plant after earlier suitors such as CNOOC and Vitol dropped out of bidding.

China’s LNG Imports Soar to Seasonal High. China’s imports of LNG jumped to the highest-ever level for February, rising to 5.5 million tonnes, up 15% year-on-year as JKM prices plunged to $8.5 per mmBtu and import economics improved, setting the Chinese economy on course for an 8% year-on-year hike.

Suriname to See First Oil by 2028. French energy major TotalEnergies (NYSE:TTE) is moving towards an end-2024 FID on the Sapakara South-Krabdagu prospect combining 700 MMBbls in recoverable reserves, with the South American nation seeing first oil from the 200,000 b/d capacity project in 2028.

Chile’s Lithium Firms Believe in Lithium Despite the Price Plunge. Chile’s leading lithium producer SQM (NYSE:SQM) is plowing ahead with project expansions despite an 82% drop in quarterly profit, in line with Li carbonate prices collapsing to ¥100,000 per metric tonne last year, with investors increasingly believing the bottoming out is over.

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Sh*t coins running again. Pure speculation.

Inflation running again. Rates higher for longer? Increases inflation even faster. LOL.

AI is in bubblicious territory.

NVDA is cooking its books. LOL. This is what we saw in the dot.com era. CSCO was cooking the books as were far more egregious (criminal) examples that eventually were liquidated.

The 2023 analogous to 1998 pullback? 2024 the 1999 run higher?

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Certainly the 'passive investing' phenomenon is having some form of impact driving pure momo plays higher. Does it end in tears (again)?

jog on
duc
 
Is it a bubble?

From Ray Dalio

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For the week going forward it remains a bullish posture. RE moving from a 0 to a +1. Energy moves to a +2 from a 0 are the two changes from last week.

jog on
duc
 

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Bond bull market is dead. The Fed cannot control the mid-long end of the curve.

Once the RRP runs out, bank reserves will start to fall, triggering yet another liquidity crisis.

At that point, the Fed lowers the FFR, and the yield curve un-inverts.

Meanwhile 'insiders' are dumping lots of stock.

The 'bubble' is in government debt. The most dangerous bubble of all.

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Can't find the exact match, however: stocks do not like higher yields.

In the bond bull, longer term yields followed short term yields lower. That will not happen this time as inflation is again present. What has become increasingly obvious is that there is now a demand for term premium.

If the Fed lowers the FFR, inflation will re-ignite. It already is showing signs of doing so.

Prices have 'slowed' in going up, but they are not coming down.

Oil and energy are critical:

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Oil demand is set to grow...biggly.

Oil production is static to falling.

Natural gas is plentiful and can replace oil etc in some situations to create electricity. However oil based products are everywhere. If oil moves back into a 9 handle, Houston we have a problem.


jog on
duc
 
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So this is an important headline.

The SRF is the new 'Standing Repo Facility' which banks who are in trouble can access. The Fed wants to take the RRP to zero so that's a further $500B reduction. When the RRP = $0.00 then banks will start to lose reserves. As they lose reserves and get into trouble, so they can access the SRF.

QE is already being planned. This time they want to do QE using Bills rather than Notes/Bonds. Bills will naturally roll off their balance sheet without having to do a QT.

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As previously detailed, the complete lack of refinancing atm, holding off for Fed cuts has totally invalidated this measure currently.

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So with earnings season complete, pretty pathetic earnings per share growth. But better than nothing.

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Quietly, with no fanfare, gold moving higher.

Why with high interest rates, USD still (relatively) strong and the economy 'booming'...is gold moving higher?

Because the shift in physical East and the re-linking of the gold-oil ratio makes it almost inevitable that the POG has to rise. Then add in the Fed's missive re. the SRF, QE infinity, etc. and gold is the way to protect from the inevitable dilution of the USD and all fiat currencies.

Gold is money. It is not an 'investment' per se. It is simply a way to protect your purchasing power. You want an 'investment' or 'speculation' trade BTC or whatever. The two are not comparable.

A way to trade gold, is to hold silver. When the ratio's suggest selling silver, convert into gold. Rinse and repeat. Particularly useful if you hold the physical in both.

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jog on
duc
 
China, Oil and Gold:

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China is making significant inroads in buying oil for CNY.

This is being facilitated via increasing trade in Chinese goods/services, netted out with gold.

If China through its increased ability to purchase oil for CNY, will x2 its per capita oil demand, to about +/- 16M/day.

This would at today's production levels create a deficit of +/- 13M/day. Pushing POO to $90+. That price would have serious consequences for everyone, China included.

The release valve for this pressure on the POO is China settling in Chinese goods/services/gold. Gold moves higher secularly, keeping the POO contained to sub $100/barrel.

If the US choose to fight this trend, inflation will move much higher and the (much) higher POO will crash economies.

On that note, Oil News:

The gas markets have been missing an OPEC-like instrument that could collectively curb supply whenever global balances indicate a huge glut, and it now seems leading US gas producers are considering taking on that role, albeit temporarily.

- Presenting its Q4 results, the US’ largest gas producer EQT announced it would cut some 30-40 Bcf of net production through March, equivalent to 5-7% of the company’s output.

- With Chesapeake pledging to cut 20% of its output, Comstock reducing the number of rigs in operation from 7 to 5 and suspending dividends, and Antero cutting its drilling budget by 26%, Henry Hub prices have rebounded to $1.9 per mmBtu.

- Net positioning in Henry Hub futures softened a little as hedge funds quit some 50,000 short contracts in the week to February 27, but the net short on US natural gas remains the largest since March 2020.

Market Movers

- Canada’s midstream giant TC Energy (NYSE:TRP) agreed to sell the Portland Natural Gas Transmission System to BlackRock for $1.14 billion as part of its divestment drive.

- The US solar business of energy major Shell (LON:SHEL), the Kansas City-based Savion, has put a quarter of its assets - totaling up to 10.6 GW - up for sale a little more than two years since the company’s acquisition.

- The world’s largest mining company BHP (NYSE:BHP) has launched a major restructuring of its operations, having already started to cut jobs in Australia after its net income plunged by 86% year-on-year in Q4 to $463.5 million.

Tuesday, March 05, 2024

Oil prices have started this week off on the wrong foot after bullish news of OPEC+ extending its voluntary production cuts was offset by an underwhelming set of commitments from China’s National People’s Congress. The markets expected promises of comprehensive stimulus packages but were met with vows of "prudent monetary policy” and acknowledgments of the difficulties ahead. With this, Brent continues to trade around the $82 per barrel mark, with WTI dropping to 78 per barrel.

OPEC+ Extends Voluntary Cuts into Q2. OPEC+ members agreed to extend voluntary oil production cuts of 2.2 million b/d, with Russia announcing an extra 471,000 b/d cut in the second quarter of 2024 and Saudi Arabia sticking to its $9 million b/d output rate.

Rubymar Becomes First Victim of Red Sea Warfare. The UK-owned bulk tanker Rubymar sank on March 2, two weeks after being severely damaged by a Houthi missile, becoming the first vessel lost since November and leaking fertilizer potentially causing an environmental crisis.

US Bans China Buying SPR Crude Barrels. The latest 2024 government funding bill contains provisions that would block Chinese companies from buying oil from the United States' Strategic Petroleum Reserve, following several instances of Unipec buying SPRs in 2017-2022.

Europe Wants Oil Companies to Finance Its Climate Goals. The European Union is looking into ways to compel the fossil fuel industry to help pay for fighting climate change in poorer countries, with actual climate investment needs totaling $1 trillion per year by 2025.

Mexico Shutters Polluting Refinery. Regional authorities of Nuevo Leon state said they have closed the 275,000 b/d Cadereyta refinery over the refusal of state oil company Pemex to cooperate with environmental inspections. Despite this statement, continued flaring suggests the refinery is still running.

TMX Line Fills to Start in April. According to MEG Energy (ASX:MEG), line fill on Canada’s highly anticipated Trans Mountain Expansion pipeline will start in April, with the state-controlled pipeline operator of TMX calling for 2.1 million barrels in April and the same amount in May.

Gunvor Pays $662 Million to End Bribery Cases. Global trading firm Gunvor agreed to pay $662 million to close US and Swiss investigations into a scheme used to pay bribes to Ecuadorean officials to win business, ending a long-standing probe that started in 2020.

Rio’s Arizona Copper Mine Gets Judicial OK. The 9th US Circuit Court of Appeals narrowly ruled that the federal government may transfer land in Arizona to Rio Tinto (NYSE:RIO) for the Resolution Copper mining project, potentially 25% of future US copper supply, heavily opposed by Native Americans.

Chevron Gives Up on Biodiesel Expansion, For Now. US oil major Chevron (NYSE:CVX) has indefinitely idled two biodiesel plants – one in Ralston, Iowa, and another in Madison, Wisconsin – on the back of renewable credits falling to a three-year low as supplies keep on growing.

Trafigura Moves into UK Biofuels Production. Global trading major Trafigura bought the European business of UK-based fuel supplier and biodiesel producer Greenergy, less than a month after it failed to take over Mediterranean refiner Saras, outfooted by Vitol.

Exxon Mulls Its Options in Suriname. According to Suriname’s national oil firm Staatsolie, US oil major ExxonMobil (NYSE:XOM) and Malaysia’s Petronas are considering the potential for a floating LNG unit after a 2020 gas discovery at the Sloanea prospect, initially having shelved the project.

Vitol Expands Further In the Med. VTTI, a subsidiary of global trading major Vitol, is reportedly close to buying a majority stake of 92.68% in Italy’s Adriatic LNG terminal from ExxonMobil (NYSE:XOM) and QatarEnergy for almost $900 million, as BlackRock bowed out of its bid.

BP Looks for Gas In Azerbaijan’s Waters. As legacy crude production continues to mature in offshore Azerbaijan, UK energy major BP (NYSE:BP) is eyeing the second half of 2024 to drill its first appraisal well in the ACG field, looking for deep gas reservoirs below the producing oil field.

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jog on
duc
 
China, Oil and Gold:

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China is making significant inroads in buying oil for CNY.

This is being facilitated via increasing trade in Chinese goods/services, netted out with gold.

If China through its increased ability to purchase oil for CNY, will x2 its per capita oil demand, to about +/- 16M/day.

This would at today's production levels create a deficit of +/- 13M/day. Pushing POO to $90+. That price would have serious consequences for everyone, China included.

The release valve for this pressure on the POO is China settling in Chinese goods/services/gold. Gold moves higher secularly, keeping the POO contained to sub $100/barrel.

If the US choose to fight this trend, inflation will move much higher and the (much) higher POO will crash economies.

On that note, Oil News:

The gas markets have been missing an OPEC-like instrument that could collectively curb supply whenever global balances indicate a huge glut, and it now seems leading US gas producers are considering taking on that role, albeit temporarily.

- Presenting its Q4 results, the US’ largest gas producer EQT announced it would cut some 30-40 Bcf of net production through March, equivalent to 5-7% of the company’s output.

- With Chesapeake pledging to cut 20% of its output, Comstock reducing the number of rigs in operation from 7 to 5 and suspending dividends, and Antero cutting its drilling budget by 26%, Henry Hub prices have rebounded to $1.9 per mmBtu.

- Net positioning in Henry Hub futures softened a little as hedge funds quit some 50,000 short contracts in the week to February 27, but the net short on US natural gas remains the largest since March 2020.

Market Movers

- Canada’s midstream giant TC Energy (NYSE:TRP) agreed to sell the Portland Natural Gas Transmission System to BlackRock for $1.14 billion as part of its divestment drive.

- The US solar business of energy major Shell (LON:SHEL), the Kansas City-based Savion, has put a quarter of its assets - totaling up to 10.6 GW - up for sale a little more than two years since the company’s acquisition.

- The world’s largest mining company BHP (NYSE:BHP) has launched a major restructuring of its operations, having already started to cut jobs in Australia after its net income plunged by 86% year-on-year in Q4 to $463.5 million.

Tuesday, March 05, 2024

Oil prices have started this week off on the wrong foot after bullish news of OPEC+ extending its voluntary production cuts was offset by an underwhelming set of commitments from China’s National People’s Congress. The markets expected promises of comprehensive stimulus packages but were met with vows of "prudent monetary policy” and acknowledgments of the difficulties ahead. With this, Brent continues to trade around the $82 per barrel mark, with WTI dropping to 78 per barrel.

OPEC+ Extends Voluntary Cuts into Q2. OPEC+ members agreed to extend voluntary oil production cuts of 2.2 million b/d, with Russia announcing an extra 471,000 b/d cut in the second quarter of 2024 and Saudi Arabia sticking to its $9 million b/d output rate.

Rubymar Becomes First Victim of Red Sea Warfare. The UK-owned bulk tanker Rubymar sank on March 2, two weeks after being severely damaged by a Houthi missile, becoming the first vessel lost since November and leaking fertilizer potentially causing an environmental crisis.

US Bans China Buying SPR Crude Barrels. The latest 2024 government funding bill contains provisions that would block Chinese companies from buying oil from the United States' Strategic Petroleum Reserve, following several instances of Unipec buying SPRs in 2017-2022.

Europe Wants Oil Companies to Finance Its Climate Goals. The European Union is looking into ways to compel the fossil fuel industry to help pay for fighting climate change in poorer countries, with actual climate investment needs totaling $1 trillion per year by 2025.

Mexico Shutters Polluting Refinery. Regional authorities of Nuevo Leon state said they have closed the 275,000 b/d Cadereyta refinery over the refusal of state oil company Pemex to cooperate with environmental inspections. Despite this statement, continued flaring suggests the refinery is still running.

TMX Line Fills to Start in April. According to MEG Energy (ASX:MEG), line fill on Canada’s highly anticipated Trans Mountain Expansion pipeline will start in April, with the state-controlled pipeline operator of TMX calling for 2.1 million barrels in April and the same amount in May.

Gunvor Pays $662 Million to End Bribery Cases. Global trading firm Gunvor agreed to pay $662 million to close US and Swiss investigations into a scheme used to pay bribes to Ecuadorean officials to win business, ending a long-standing probe that started in 2020.

Rio’s Arizona Copper Mine Gets Judicial OK. The 9th US Circuit Court of Appeals narrowly ruled that the federal government may transfer land in Arizona to Rio Tinto (NYSE:RIO) for the Resolution Copper mining project, potentially 25% of future US copper supply, heavily opposed by Native Americans.

Chevron Gives Up on Biodiesel Expansion, For Now. US oil major Chevron (NYSE:CVX) has indefinitely idled two biodiesel plants – one in Ralston, Iowa, and another in Madison, Wisconsin – on the back of renewable credits falling to a three-year low as supplies keep on growing.

Trafigura Moves into UK Biofuels Production. Global trading major Trafigura bought the European business of UK-based fuel supplier and biodiesel producer Greenergy, less than a month after it failed to take over Mediterranean refiner Saras, outfooted by Vitol.

Exxon Mulls Its Options in Suriname. According to Suriname’s national oil firm Staatsolie, US oil major ExxonMobil (NYSE:XOM) and Malaysia’s Petronas are considering the potential for a floating LNG unit after a 2020 gas discovery at the Sloanea prospect, initially having shelved the project.

Vitol Expands Further In the Med. VTTI, a subsidiary of global trading major Vitol, is reportedly close to buying a majority stake of 92.68% in Italy’s Adriatic LNG terminal from ExxonMobil (NYSE:XOM) and QatarEnergy for almost $900 million, as BlackRock bowed out of its bid.

BP Looks for Gas In Azerbaijan’s Waters. As legacy crude production continues to mature in offshore Azerbaijan, UK energy major BP (NYSE:BP) is eyeing the second half of 2024 to drill its first appraisal well in the ACG field, looking for deep gas reservoirs below the producing oil field.

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jog on
duc
Interesting to see the US exporting more crude (aka to China) while depleting their strategic reserve: and then adding a ban on the direct sell to China ..
which is obviously powerless as oil is oil.
But yes, de facto, the SPR was at least partly sent to China ..I lack figures for order of magnitude...but isn't it ironic ?
 
Interesting to see the US exporting more crude (aka to China) while depleting their strategic reserve: and then adding a ban on the direct sell to China ..
which is obviously powerless as oil is oil.
But yes, de facto, the SPR was at least partly sent to China ..I lack figures for order of magnitude...but isn't it ironic ?
is that the particularly high sulphur oil that MacQuarie didn't like buying a few years back ( that they are selling to China )

just asking
 
is that the particularly high sulphur oil that MacQuarie didn't like buying a few years back ( that they are selling to China )

just asking
Does not really matter as we do not know what is in the SPR .
But depleting your oil reserve while selling oil to your key enemy ..
well it might take another 50y for the generals and DOD to move from USSR focus to CCP..the wall fall is just 35y old history , let them refresh their manuals😭
 
MacQuarie ( and their customers ) were complaining about the extra dangers/costs of refining the (stale ) high sulfur oil

possibly China is one of the few buyers of such a putrid brew

( would be interesting to see if the US bought it back as diesel and heavy lubricants )
 
Pretty quiet day:

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Any AAPL fan boys, is this a buy?

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Global savings:

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This drives a stronger USD.

A strong USD drives UST market dysfunction (loss of liquidity) as Yellen crowds out the UST market with the accelerating need of the US government for money.

See the $1T in 100 days.

Debt growth is approaching the exponential stage. Something will break soon.

Another early start in the day job.

jog on
duc
 
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So obviously, less gasoline used due to EVs, less demand for oil.

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BTC is not money.

Is it or could it be a reserve asset? Currently it is not. It could in theory become a reserve asset. Would it?

If it does not, then it simply remains a 'hot' stock until it isn't.

For it to become a reserve asset, it would require some primary properties of safety. This it cannot provide due to its digital existence only. You need 'miners' to maintain the network and they require compensation. You require huge gobs of energy to power the process.

Energy is the ultimate currency. No energy, no modern world. BTC ultimately has a significant energy cost and that cost is not secure. Hence BTC is not 100% secure. If it is not 100% secure it is unlikely to be utilised as a reserve asset. That doesn't even consider its ability to be hacked, tracked and otherwise fuc*ed with.

There is an article: https://allstarcharts.com/i-used-to-be-a-gold-bug/

Comparing BTC ETFs to the release of the Gold ETF.

Is physical gold analogous to physical BTC? Clearly the answer is no. The argument is therefore comparing apples to oranges while claiming to compare apples to apples. In the short term the premise may well hold true, but in the longer run?

Obviously the momo traders are jumping on board and giving it new life.

jog on
duc
 
momo traders?

Mr Mike,

Momentum traders, technicals...

Some updates:

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Payrolls tomorrow.

ECB is adding to the Fed's cut in June narrative.

Everyone and I mean everyone is expecting the stock market to rip higher as rates come down.

That is not the 'pain trade'.

What if, like our fat fu*k on the deckchair, it collapses?

As the Fed cuts, the yield curve will un-invert. That un-inversion on all previous occasions has had stocks falling, not rising.

Just sayin.

jog on
duc
 
Oil News:

Friday, March 8th 2024

The flatlining of oil prices continued this week despite positive trade data coming out of China and impressive Indian oil demand, with a continued build-up in US crude inventories and skepticism vis-à-vis OPEC+’s extended voluntary cuts offsetting that positive momentum. The last time ICE Brent futures settled outside of the $80-85 per barrel bandwidth was on February 7, suggesting the end of this week will mark a month-long sideways drift for oil.

Saudi Arabia Transfers 8% in Saudi Aramco. Saudi Arabia transferred an 8% stake in Saudi Aramco (TADAWUL:2222) worth more than $160 billion to the country’s Public Investment Fund, widely seen as corporate reorganization before the NOC’s public offering later in 2024.

First Casualties in Houthi Shipping Attacks. Three sailors have died in the Houthi’s attack on the Greek-owned, Barbados-flagged dry bulk tanker True Confidence, which struck some 50 nautical miles off the coast of Aden, marking the first casualties since the Red Sea warfare began.

Turkey Eyes Somalia’s Offshore Oil. Turkey signed an offshore oil and gas cooperation deal with Somalia, one of the last offshore frontiers completely untapped due to civil strife and regional separatism, hoping to start seismic surveying as soon as this year.

Santos Hindered Again by Lawsuits. Leading Australian oil producer Santos (ASX:STO) is facing legal challenges again, less than two months after pushing through with its Barossa project, with an indigenous group appealing the approval of the $2.4 billion Narrabri gas project, claiming the climate impact wasn’t adequately assessed.

Chinese Oil Major Mulls UAE Expansion. China’s state-owned oil firm Sinopec (SHA:600028) is reportedly in talks with trading company Montfort to purchase its 65,000 b/d Fujairah refinery, one of the region’s largest producers of VLSFO, less than a year after Unipec sold it to Montfort.

ADNOC, Saudi Aramco Move into US LNG. The Middle East will be investing in US LNG soon, with Saudi Aramco (TADAWUL:2222) reportedly in talks for Sempra’s Port Arthur LNG project whilst the UAE’s ADNOC is mulling an offtake deal with NextDecade’s (NASDAQ:NEXT) Rio Grande LNG.

Exxon Takes Guyana Row to Arbitration. US oil major ExxonMobil (NYSE:XOM) has initiated arbitration proceedings with the International Chamber of Commerce to assert its pre-emption rights on Hess Energy’s assets in Guyana’s offshore Stabroek block, pitting it against Chevron.

ENI Posts Huge Oil Discovery in Ivory Coast. Italy’s offshore-focused oil producer ENI (BIT:ENI) announced it had struck oil with its Murene-1 exploration well offshore Ivory Coast, with a recoverable resource potential that could be up to 1.5 billion barrels of oil equivalent.

China’s EV Sales Continue to Linger. China’s electric vehicle sales slowed down to 18.2% in January-February after posting a 20.8% growth rate for all of 2023, with market leader BYD prompted to discount even more and export 19% of its cars overseas, the highest ratio ever.

Germany Steers Clear of Rosneft Refinery Nationalization. The German government extended its trusteeship over Rosneft-owned refineries in the country for another six months, stopping short of expropriating the Russian state oil company’s assets.

China Hope Lifts All Base Metals. Copper, lead, nickel, tin, and aluminum have all posted notable week-on-week gains, up by 2-4% with lead seeing the strongest growth, as a weakening dollar and better-than-assumed Chinese demand improved sentiment in the markets.

Arson Attack Debilitates Tesla’s German Plant. Following what seems to be a deliberate arson attack by a far-left organization called the Volcano Group, Tesla’s (NASDAQ:TSLA) Berlin factory halted production and will be without electricity until March 17.

Chevron Restarts Drilling in Orinoco Belt. US oil major Chevron (NYSE:CVX) restarted drilling works at the Petroindependencia field in Venezuela’s oil-prolific Orinoco Belt, with a peak capacity of 400,000 b/d, hoping to increase its output in the country to 250,000 b/d by next year.

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So if you are still with me after that chart dump:

The market remains as Mr FFF alludes, in bull mode. Why?

There are a number of reasons:

1. Passive investing...just keeps buying as money is allocated
2. Management buybacks, their Options (pay packet tweak) are more valuable the higher the price of their stock (last really seen in 1990's)
3. Speculation that rates will be cut by the Fed
4. Momo trading
5. Massively increased speculation via Options market (has grown with retail due to the leverage, my firm trades tens of thousands of Options each week)
6. Bond market has real issues for retail investors, probably Hedge Funds as well. A far more complex market. Not all Fund managers are a Gundlach. Money market funds coming out of the RRP are buying (predominantly Bills (short duration))
7. Recency bias and cheerleading
8. Media complacency
9. Euphoria around crypto's. This had died down a little, however seems to be back in full force along with AI and this time it's different

There are probably others but they will do for a start.

Which means, for the moment at least, you have to be long.

When do you stop being long? Obviously when the market stops going up. Duh. The problem is that there is a lot of conditioning of BTD to overcome. Buying the dip (except for 2022) was and is again, very profitable.

A lot of the charts, opinions, research that I post is very bullish. It is a bull market.

The problem is (which I also post on) that the fundamentals are horrible. Really bad. Hence my largest position by far is and has been physical gold.

I can live with being long in the trading accounts because as a % it is far smaller and I'll flip short pretty quickly when necessary.

So what still works?

Screen Shot 2024-03-09 at 8.32.03 AM.png

When USD is down there is far less chance of a liquidity issue in the UST market. Stock market strong(er).

Screen Shot 2024-03-09 at 8.32.32 AM.png

With the Mag. 7 this has been far less reliable. However still worth watching.

Screen Shot 2024-03-09 at 8.31.22 AM.png

This is currently an unknown. Previously as the curve un-inverted, stocks tumbled. This time? Not sure we will find out. Certainly the theory of the 'pain trade' would suggest that stocks puke as rates come down. That is just so contrarian to the media/blogger position. So the date for the FFR to come down is June.

Insiders (from an earlier chart) have been selling stock very aggressively. Not a good sign. Same thing happened in 2000. Remember US Tax revenues are paid by these chaps, 90% odd. They will get the nod long before we do.

Screen Shot 2024-03-09 at 8.41.33 AM.png

This is a very useful chart. It correlates very closely to the USD. The USD is lower, which, keeps liquidity issues at bay in the UST market. MOVE is the vol. in the UST market. All (relatively) calm currently.

Screen Shot 2024-03-09 at 8.44.08 AM.png

Stock volatility. Pretty much all time lows.

Another view:

Screen Shot 2024-03-09 at 8.46.09 AM.png

Obviously I'm watching.

jog on
duc
 
The bulls case.


Screen Shot 2024-03-09 at 3.20.49 PM.pngScreen Shot 2024-03-09 at 3.21.01 PM.png
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AI bubbling higher.

Screen Shot 2024-03-09 at 3.21.58 PM.pngScreen Shot 2024-03-09 at 3.22.19 PM.pngScreen Shot 2024-03-09 at 3.22.36 PM.png

The outlook (technically) for next week:

Screen Shot 2024-03-09 at 3.33.46 PM.png

Which is simply saying be careful. Technically it is still bullish, but play slightly more defensive this week.

Screen Shot 2024-03-09 at 3.34.48 PM.png

Last weeks ETF sectors.

Going forward to next week:

Energy has moved up from last week and could outperform this week. Real estate XLRE could also outperform this week. It tends to be a bit less volatile than other sectors. Industrials and Materials (XLI & XLB) are ripping higher. Banks (XLF) seems to be toppy atm.



Screen Shot 2024-03-09 at 3.41.13 PM.png


Now I tend to trade the ETF's rather than individual stocks. That way I can ignore earnings, etc.

Interesting stuff happening next week:

On 11 March, the BTFP Fed lending facility to the Banks finishes. This facility is a liquidity provider. It's removal will impact liquidity negatively.

Of course if something is taken away, something will be added: I will look at the ISDA proposal later in the week.

We have x4 Options expiry this week. Wednesday tends to be the most volatile day when this happens.

Talked about already, but RRP is drawing down fast. This has offset the QT by about +$1T. As this empties, QT will be felt significantly more than it has been.

When discussing the un-inverting of the yield curve, the following is under-appreciated:

Currently we still have a 3.5% (official) inflation rate.
The national debt is accelerating...$1T in 100 days. This will continue.
The size of this debt via interest payments is highly inflationary.
Any cuts to the FFR increase inflationary pressures.

All the above are facts.

Over the last 40yrs or so, as the Fed brings down the FFR the longer end of the curve has also fallen. Fact.

This time is likely to be different.

As the short end of the curve falls due to the lowering of the FFR, the longer end could (will) go higher.

Why?

Inflation will be again moving higher. Previously, due to geopolitical macro factors, the last 40yrs have been largely disinflationary allowing the long end of the curve to fall in lockstep with the FFR. This was China entering the WTO in 2000. This is now reversing. Biggly.

Therefore inflation is present and looking secular. Without a positive term premia, the long end will not fall. It will move higher with the inflation.

What we will have with a lower FFR is a de facto YCC at the short end, free market rates at the long end.

The banking system currently holds trillions at the mid-to-long end of the curve.

Which brings me the full circle to ISDA.

jog on
duc
 

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So I mentioned the ISDA

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Full letter here: https://www.isda.org/a/h3sgE/ISDA-Submits-Letter-to-US-Agencies-on-SLR-Reform.pdf

Not the first time:

Screen Shot 2024-03-11 at 6.34.51 AM.png

Full details: https://www.federalregister.gov/doc...nd-deposits-at-federal-reserve-banks-from-the

And from the Fed Minutes:

Screen Shot 2024-03-11 at 6.36.10 AM.png

Full Minutes: https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20200315.pdf

Why is this important?

There are lots of Treasury auctions that are fails. The Primary Dealers (JPM etc) have to buy and warehouse this garbage. Their Balance Sheets are full, massively overleveraged.

Still Yellen needs to sell more and more and more to feed the massive deficits.

The only way to do so, other than the Fed outright monetising the whole deficit going forward, is to try and hide it on the Banks' Balance Sheets. The only way that the Banks can buy this garbage is to not have to declare it at mark-to-market.

The Banks just create money, buy this shite and warehouse it.

It is of course QE infinity.

Now of course if the Banks get this exclusion...it is buy the banks.

This has been brought about by any number of countries that no longer buy UST. China, Russia, etc.

Gold v 10yr UST

Screen Shot 2024-03-11 at 6.55.26 AM.png

The 10yr yield has moved waaaay up. Gold has risen. This is radically different from previous iterations.

So if the Banks get their SLR cut to 0% the UST yield should in theory move to 0%. Bond prices will rally as they return to ZIRP. Of course in real terms we will be back in NIRP as inflation will rise.

Of course that is in theory.

It will still depend on whether the Fed actually cuts the FFR. It would be an interesting social dynamic: Banks (again) get a bail out and free money, everyone else, no not today.

Do the Banks need another bailout? Absolutely they do. They are all insolvent.

With the end of BTFP and the theoretical repayment (LOL) of the mark-to-market prices of their longer dated treasuries:

Screen Shot 2024-03-11 at 7.10.35 AM.png

Their losses have destroyed their capital base because those purchases were leveraged in the first place.

Will the Banks get their SLR exemption. Yes of course they will. If not, overnight we move to 2008 and a banking collapse.

jog on
duc
 
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