- 13 February 2006
Druckenmiller and Tudor-Jones
These are a must read:
I'll be going through these most of the week as their implications pretty much explain the current market action.
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Ian Lyngen of BMO Capital Markets:“I’m not hanging up the ‘Mission Accomplished’ banner just yet. Transportation was a big downside factor (-0.9% m/m). However, food and beverages (0.3%), housing (0.3%), and services (0.3%) are still showing solid gains. 4 cuts by end-2024? Again, ain’t happening. The market sees what it wants to see. It’s been wrong on the Fed this entire cycle.”
Anna Wong of Bloomberg Economics:“This print was good news for the Fed and offers evidence that monetary policy is still effective and impacts the real economy with a lag -- the fundamental things apparently still apply. This takes a rate hike off the table in December and reinforces our call that July was the last hike of the cycle and the process will now shift to the Fed attempting to delay cuts as long as possible.”
Greg McBride, Chief Financial Analyst at Bankrate“October’s surprisingly soft core CPI reading will increase Fed officials’ confidence that rates are sufficiently restrictive. Still, core CPI readings will need to continue on this path for several more months for the FOMC to declare a definitive end to the rate-hike cycle. Looking at the 12-month change in core inflation, it’s still running at twice the pace of the Fed’s 2% target. Overall, inflation is still a long way from the target — and the road there is sure to be bumpy.”
Jay Bryson, Wells Fargo chief economist:“The slower pace of inflation is little comfort to households still dealing with the cumulative effect of rising prices. The strain on household budgets is real with the Consumer Price Index up more than 18% in the past 3 years.”
Bryce Doty, of Sit Investment Associates:“You would need to see a few more months of 0.2 before saying mission accomplished. I think the Fed is going to delay easing at this point.”
Kathy Jones of Charles Schwab:“The Fed looks smart for effectively ending their tightening cycle as inflation continues to slow. Yields are down significantly as the last of investors not convinced the Fed is done are likely throwing in the towel.”
Oscar Munoz, macro strategist at TD Securities“Things are going their way and they probably don’t want to change policy until there is more confidence in the inflation outlook. I think the Fed sticks with it’s on-hold policy until they get a series of low month to month readings over a period of 3 to 6 months and/or the labor market shows a lot more weakness.”
Stuart Paul, of Bloomberg Economics“Core goods still in deflation, that was a surprise for us. We were looking for strength there. New vehicles prices and apparel were surprises to the downside for us. The OER decline was expected, though rents continue to move sideways (some concern there). Lodging away from home was a driver of inflation in Sep, it mean-reverted today. All told, good report for the Fed. They will continue to maintain the odds of another hike on the table, but the market won’t buy it. Higher for longer will be the message Fed officials will try to convey.”
Spencer Hakimian, CEO of Tolou Capital Management:“Lodging away from home again served as a critical swing factor. Whereas a surge in lodging prices boosted shelter costs in the September report, the 2.5% month-on-month decline in October created approximately 3 bps of drag and explains much of the downside surprise in inflation. Measures of homeowners’ equivalent of rent moderated to 0.4% in October from 0.6% in September, creating additional disinflation in reported shelter costs.”
Victor Masotti, Director at Clear Street:“The cumulative effect of 525 basis points of tightening, along with QT, are evidently working. The FOMC must exercise patience and allow last year’s tightening fully flow through the economy. Two-year Treasuries are poised for significantly attractive risk-adjusted returns, due to market pricing for rate cuts as well as a nearly 5.00% yield.”
“Softer than expected CPI data has traders repricing probabilities for the FOMC’s next move as today’s inflation reading supports the view that rates have peaked and the FOMC will need to begin easing sooner rather than later. At close of business yesterday, December FOMC rate hike probabilities were at 15%, while we are now at 0% chance of a hike after CPI YoY came in at 3.2% versus expectations of 3.3% and last month’s print at 3.7%. The narrative has now shifted towards 2024 as to when the first rate cut will come with the market pricing in a 75% chance of a cut in May 2024 and pricing in more than one 25bp rate cut in June 2024. In repo pricing, we have seen 2 and 3mo term repo tighten 2-3bps from last week’s prints. As for year-end funding, general collateral year-end turn (12/29/23 – 01/02/24) has been printing in the 5.60 range.”
As OPEC+ prepares for its meeting on November 26, African producers are tacitly lamenting the oil group’s recalibration of 2024 production targets that will curb the maximum amount Nigeria or Angola can produce.
- Following tense negotiations in June, all African countries agreed they would be subjected to lower 2024 quotas unless they could demonstrate higher production capacity before November, partly explaining the bumper production figures from Nigeria and Angola.
- Nigeria, pumping only 1.38 million b/d on average in the first half of 2023, has been some 400,000 b/d below its OPEC quota, similar to Angola which still carries a 1.46 million b/d quota despite production averaging only slightly above 1 million b/d.
- Three upstream consultancies - Rystad, IHS, and WoodMac - have submitted their African production capacity figures to the OPEC secretariat and the OPEC+ meeting is believed to be deciding on their fate this Sunday.
- Backed by BlackRock, Canadian power generation firm Capital Power (TSE:CPX) agreed to buy two natural gas-fired power plants in the US for $1.1 billion from Beal Financial, making it North America’s fifth largest operator.
- The merger of Chesapeake Energy (NASDAQ:CHK) and Southwestern Energy (NYSE:SWN) might be the next big thing in US M&A activity after investor Kimmeridge came out in support of the prospective deal.
- Australia’s Karoon Energy (ASX:KAR) agreed to buy a 30% stake from operator LLOG in the Who Dat and Dome Patrol oil fields in offshore Louisiana, paying $720 million to break into the US Gulf Coast.
Tuesday, November 21, 2023
Oil markets are once again on edge ahead of the OPEC+ summit this weekend, with calls for deeper cuts circulating concurrently to rumors of OPEC members not being ready to agree on any coordinated response. Hence, Monday’s spike that saw Brent move back to $82 per barrel had tapered off by Tuesday morning. Barring a surprise in this week's U.S. oil inventory report, all the attention will be geared toward Vienna over the weekend.
Argentina’s New President Lifts Commodity Stocks. Argentina’s oil stocks have soared by as much as 40% Monday after libertarian candidate Javier Milei was announced the winner of the presidential election run-off, pledging to nationalize YPF (NYSE:YPF), shrink the government, and cut taxes.
Houthis Seize Israel-Linked Cargo Ship. Yemen’s Houthi militias have seized the Israel-linked cargo carrier Galaxy Leader as it was transiting the Red Sea, threatening to do the same with any other ships passing offshore Yemen and adding a new layer of maritime security risks for shippers.
Russia Lifts Gasoline Export Ban. Citing surplus domestic supply and lower prices, Russia’s energy ministry scrapped restrictions on gasoline exports, introduced on September 21 to tackle fuel shortages over the country, with some 150,000 b/d expected to be exported from December on.
Saudi Arabia Keeps On Finding Gas. Saudi Arabia’s national oil firm Saudi Aramco (TADAWUL:2222) announced the discovery of two new natural gas fields in the Empty Quarter Desert in the country’s southern part, with both the al-Hiran and al-Mahakik prospects showing commercial gas flow rates.
Venezuela Nears Deal with Trinidad. Following months-long talks with Trinidad and Tobago as well as project operator Shell (LON:SHEL), Venezuela is expected to approve a 25-year license for the UK-based energy major to develop the 4.2 TCf Dragon field straddling their maritime border.
Lula Asks Petrobras to Generate More Jobs. Brazil’s President Lula da Silva asked the CEO of national oil firm Petrobras (NYSEBR) Jean-Paul Prates to modify the company’s 2024-2028 investment plan to prioritize local job creation, raising fears of more state intervention.
High Waters Hinder Europe’s Largest Shipping Artery. After months of drought-induced freight restrictions, navigation along the river Rhine has been limited as vessels en route to Switzerland can no longer sail under bridges due to continuous rains.
Sri Lanka Wants to Become a Nuclear Nation. The government of Sri Lanka has expressed its interest in setting up nuclear power plants as it seeks to produce cheap and reliable electricity, seeking to wean itself off its oil and coal dependence and meet its 2050 carbon neutrality target.
US Still Can’t Find Source of Gulf Oil Spill. US emergency response crews are trying to locate the source of an oil spill in the US Gulf of Mexico reported near the Main Pass Oil Gathering (MPOG) pipeline some 19 miles off the coast of southeastern Louisiana, prompting a swift pipeline halt.
Shell Pays UK Taxes Thanks to Windfall Tax. UK-based energy major Shell (LON:SHEL) recorded its first net corporate taxes in the UK last year after four consecutive years of zero payments thanks to tax credits on investment and platform decommissioning, paying $40.5 million in tax last year.
Panama’s Copper Woes Get Real. Canadian miner First Quantum Minerals (TSE:FM) warned that if Panama’s month-long blockade of the controversial Cobre Panama copper mine doesn’t stop it would be forced to suspend operations at the site, even before the country’s Supreme Court decides on its future.
Angola Hopes for Revival of Onshore Drilling. A total of 22 international and indigenous oil firms submitted 53 bids in Angola’s latest onshore licensing round in the mostly untapped Lower Congo and Kwanza basins, as Angolan authorities hope to find new sources of supply apart from offshore.
China Seeks to Boost Domestic Biodiesel Consumption. Despite being one of the leading global exporters of UCO, China’s internal use of biodiesel has been lukewarm, prompting the National Energy Administration to launch several pilots to spur domestic consumption of the non-fossil fuel.
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And some reading:
From Mr fff:
The impetus to execute the transgendered bulls has passed, an opportunity lost in the westerly winds of progress. Congratulations for all those celebrating TRANSGENDER REMEMBRANCE DAY on this day and may we revel in the adventures of bravery of all of the many sexes out there — people morphing from one to the next in search of pleasure and individualism.
I carried out my day in complete honor, gaining 80bps in genteel trade. This is National Festival Week, a time and place that is very special to Americans — as we celebrate the conquering of the Americas — superior people building towards the sky with dreams of living forever. We revel in the glory of Pax Americana when we cut into the turkeys and mashed potatoes, heavily gravied — washed down with either Apple cider or nectar of the Gods. I will always reflect back and cherish the many feasts enjoyed at House Fly and the feelings they gave me of hope and safety.
It is unusual for markets to bid lower on this Holy Week, but entirely acceptable to cut the elevator cords on Friday — as Blackened Friday looms and the expectations rarely if ever meld with reality.
I offer nothing but good tidings and happy days, at least until Friday. I shall not sell short, not matter my feelings and will only remind you, the unwashed reader, that to bet against the fondest memories and ravage their meaning is self-hatred. Love thyself before you can love others.
With that being said, I still hate you all — but feel that I am especially talented and gifted, unique in many regards, and will do as I like when I prefer to do it.
after that mess with those inverse VIX ETFs ??What I find nuts is the vix, isn't it time to buy long a vix etf?