crude-oil - What We're Reading - StockBuz2024-03-29T04:53:32Zhttp://stockbuz.ning.com/articles/feed/tag/crude-oilNet Petroleum Imports At The Lowest Levels in 26 Yearshttp://stockbuz.ning.com/articles/net-petroleum-imports-at-the-lowest-levels-in-26-years2013-05-31T22:42:16.000Z2013-05-31T22:42:16.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290254?profile=original"><img class="align-left" style="padding: 15px;" src="http://storage.ning.com/topology/rest/1.0/file/get/1290254?profile=RESIZE_180x180" width="150"></a><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290283?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290283?profile=RESIZE_180x180" width="175"></a></p>
<p>I'm sorry but you just know in your gut that the entire "limited supply" was just a ploy. I've always found it amazing that once the big boys switched over their rigs from gas to oil, not only were we pumping out more of the black stuff, but surprise surprise they found boatloads of the stuff in Bakkens leading us towards energy independence!</p>
<p>The US produced more crude oil domestically during January-April this year at an average rate of 7.11 million barrels per day (bbl/d) than in any comparable period in more than two decades going back to 1992. Meanwhile, imports during the first four months of this year fell to the lowest level for that period since 1997, sixteen years ago. Together, the increased domestic production this year and the declining dependence on foreign sources brought net oil imports to a 26-year low. Read more at <a href="http://www.aei-ideas.org/2013/05/enengy-milestone-net-petroleum-imports-during-january-to-april-period-fell-to-only-36-2-the-lowest-level-in-26-years/#mbl" target="_blank">aei.org</a></p>
<p></p></div>Natural Gas Outperforming Crude Oil *booyah!*http://stockbuz.ning.com/articles/natural-gas-to-outperform-crude-oil2012-10-14T00:30:00.000Z2012-10-14T00:30:00.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>[Edited October 15, 2012 to add Reuters link and Citicorp PDF ]</p>
<p>Natty outperform black gold? Texas tea? Yes it's happening and the intriguing part is it could continue. It's unimaginable, unheard of, pure heresy but it at the same time, appears to be the Captain Obvious trade to these novice aging eyes. While I'm no guru and don't begin to know it's intricacies, allow me to explain from a technical analysis and common sense point of view. [<strong>CLICK ON ANY CHART TO ENLARGE</strong>]</p>
<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290070?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290070?profile=RESIZE_480x480" width="326"></a></p>
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<p><strong>#1 Falling crude oil demand</strong> in developed countries continues and this decline is expected to continue going forward......while <em>increasing</em> demand is expected in developing countries however I doubt quite a rapid increase given the status of global economies at this point in time. Main point however, is that the U.S. itself is not expecting to increase its demand any time soon.</p>
<p>On a side note, the EIA expects more U.S. homes to use more heating fuels this Winter. <a href="http://www.eia.gov/todayinenergy/detail.cfm?id=8310" target="_blank">[See report]</a> BP, Shell and others are pushing hard to export overseas <a href="http://www.reuters.com/article/2012/10/15/us-column-kemp-us-oilexports-idUSBRE89E0OQ20121015" target="_blank">[Reuters]</a></p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290099?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290099?profile=RESIZE_480x480" height="188" width="350"></a></p>
<p><strong>#2 The push for American independence from foreign oil.</strong> Now before you roll your eyes thinking this is a political pitch, I'm merely pointing out the obvious with nonpartisan facts that can easily be found at the <a href="http://www.bakerhughes.com/rig-count" target="_blank">Baker Hughs website</a>. While prior administrations have all *touted* they were for pushing for this initiative, only in the last four years have we actually *seen* a change in U.S. oil rig counts, <span style="text-decoration: underline;"><em><strong>increasing 4x</strong></em></span> from prior levels. That, my friends, is a definite step in the right direction [imo].</p>
<p>In February 2012 Citigroup acknowledged the enormous expansion of new US crude oil supply thanks to North Dakota and announced <a href="https://www.citigroupgeo.com/pdf/SEUNHGJJ.pdf" target="_blank">The Death of the Peak Oil Hypothesis a</a>nd that this excess supply will apply future downward pressure on crude pricing.</p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290119?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290119?profile=RESIZE_320x320" height="206" width="227"></a></p>
<p><strong>#3 Now for some simple common sense. </strong> I'm certain the big boys would <em><strong>love</strong></em> to push crude's pricing to test the 2008 highs [and they will one day] but given not only the fragile U.S. economy, but slowing in every other global economy, I don't see how anyone with half a brain is going to risk pushing the consumer off a ledge with higher gasoline pricing. After all, anything over $4/gal. begins to weigh on the economy. Additionally historic crude oil spikes have been proven to be followed by economic recessions <a href="http://stockbuz.ning.com/profiles/blogs/crude-oil-spikes-and" target="_blank">[see research data here]</a> so let's just take the idea of higher crude oil [minus any temporary spikes due to Middle East tensions] off the table. So how's a poor oil baron to make a buck? Why by letting natty have it's day in the sun of course!</p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290153?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290153?profile=RESIZE_480x480" height="210" width="387"></a></p>
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<p><strong>#4 So let's lower the # of natural gas rigs [red],</strong> tightening supply, and increase the crude oil rigs [blue].</p>
<p>Fewer rigs = less supply</p>
<p>Interestingly enough, the EIA has predicted that the US will become a <span style="text-decoration: underline;"><em>net-exporter of natural gas</em></span> as well. Nice! <a href="http://www.eia.gov/forecasts/aeo/chapter_executive_summary.cfm#growth" target="_blank">[See report]</a></p>
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<p>Then let's take a look and see if Mr. Stockmarket is confirming my thesis.</p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290167?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290167?profile=RESIZE_480x480" width="375"></a></p>
<p>On a daily basis I usually view heavy volume as a sign of selling, however on a longer time frame [monthly] you can see where USO was experiencing enormous volume on dips prior to it's enormous run up. Short covering and accumulation on a large scale. Big players can then sit back and unload gradually over time.</p>
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<p>*Now* we see the same huge volume in the nat. gas ETF, UNG but does that alone mean anything? Let's look further.</p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290195?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290195?profile=RESIZE_320x320" height="209" width="252"></a></p>
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<p>IN futures we see that Natural Gas futures [/NG] are in Contango with future contracts pricing higher than the current. Translation: higher forward prices are an indication of expectations of supply tightening; hence the higher forward price.......and this is the first time in YEARS that this has been the case.</p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290217?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290217?profile=RESIZE_480x480" width="350"></a></p>
<p>How about seasonal demand? It begins to creep up in September anticipating colder temperatures. A warmer-than-normal Winter such as we saw last year would hamper demand however Minneapolis MN received 2-1/2 feet of snow just last week [!] so one can only wait and see. Hope for cold temps folks.</p>
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<p>Ne<a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290239?profile=original"><img class="align-left" src="http://storage.ning.com/topology/rest/1.0/file/get/1290228?profile=original" width="375"></a>xt we examine a chart of the "Widowmaker" UNG, which for years took <em>everyone and anyone's money</em> who tried to get long as Natty. Reason being is that nat gas had an ever-increasing excess supply causing "backwardation" [lower forward pricing] and since UNG quite often recalculates based on the next months contract [which was <em>lower</em> in price], any long buyer was basically swimming against the current like a Salmon going upstream [but they have more success]. Now that natty is "Contango", forward contracts are <strong>higher</strong>, helping UNG with a boost as it re-balances. fwiw we were watching natty this Summer in Chat and had a buy signal @ $16.00!</p>
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<p><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1290234?profile=original"><img class="align-right" src="http://storage.ning.com/topology/rest/1.0/file/get/1290234?profile=RESIZE_480x480" width="375"></a></p>
<p>Lastly, I compared the <em>performance</em> of USO to UNG and not only is natty outperforming, it broke major support in the USO/UNG ratio. In my mind, this is significant. I'd like to see a correction on a weekly time frame to test $17 support but for now, my bet is nat gas will continue to outperform black gold for the near term. Come on Winter!</p>
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<p>Clearly I am more of a t/a trader than a long term, fundamental investor therefore I urge you to do your own diligence. I currently have no position in UNG, USO, nat. gas or crude oil futures nor do I intend on establishing one within the next 72 hours.</p>
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<p> </p></div>Crude Oil Spikes and Historic Recessionshttp://stockbuz.ning.com/articles/crude-oil-spikes-and-recessions2011-03-03T22:00:00.000Z2011-03-03T22:00:00.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>"<em>I've just completed a new <a href="http://dss.ucsd.edu/~jhamilto/oil_history.pdf">research paper</a> that surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Here I report the paper's summary of oil market disruptions and economic downturns since the Second World War. Every recession (with one exception) was preceded by an increase in oil prices, and every oil market disruption (with one exception) was followed by an economic recession."</em></p>
<p><em><a target="_self" href="http://storage.ning.com/topology/rest/1.0/file/get/1289974?profile=original"><img class="align-left" style="padding: 20px;" src="http://storage.ning.com/topology/rest/1.0/file/get/1289974?profile=RESIZE_480x480" width="402"></a></em></p>
<p>The table above itemizes the particular postwar events that are reviewed in detail in <a href="http://dss.ucsd.edu/~jhamilto/oil_history.pdf">my paper</a>. The paper also provides the following summary discussion:</p>
<blockquote>
<p>The first column indicates months in which there were contemporary accounts of consumer rationing of gasoline. <a href="http://econ.ucsd.edu/~vramey/research/Ramey_vine_segmentshifts_NBER.pdf">Ramey and Vine</a> have emphasized that non-price rationing can significantly amplify the economic dislocations associated with oil shocks. There were at least some such accounts for 5 of the 7 episodes prior to 1980, but none since then.</p>
<p>The third column indicates whether price controls on crude oil or gasoline were in place at the time. This is relevant for a number of reasons. First, price controls are of course a major explanation for why non-price rationing such as reported in column 1 would be observed. And although there were no explicit price controls in effect in 1947, the threat that they might be imposed at any time was quite significant (Goodwin and Herren, 1975), and this is presumably one reason why reports of rationing are also associated with this episode. No price controls were in effect in the United States in 1956, but they do appear to have been in use in Europe, where the rationing at the time was reported.</p>
<p>Second, price controls were sometimes an important factor contributing to the episode itself. Controls can inhibit markets from responding efficiently to the challenges and can be one cause of inadequate or misallocated supply. In addition, the lifting of price controls was often the explanation for the discrete jump eventually observed in prices, as was the case for example in June 1953 and February 1981. The gradual lifting of price ceilings was likewise a reason that events such as the exile of the Shah of Iran in January of 1979 showed up in oil prices only gradually over time.</p>
<p>Price controls also complicate what one means by the magnitude of the observed price change associated with a given episode. Particularly during the 1970s, there was a very involved set of regulations with elaborate rules for different categories of crude oil. Commonly used measures of oil prices look quite different from each other over this period. <a href="http://dss.ucsd.edu/~jhamilto/oil_nonlinear_macro_dyn.pdf">Hamilton (2010)</a> found that the producer price index for crude petroleum has a better correlation over this period with the prices consumers actually paid for gasoline than do other popular measures such as the price of West Texas Intermediate or the refiner acquisition cost. I have for this reason used the crude petroleum PPI over the period 1973-1981 as the basis for calculating the magnitude of the price change reported in the second column of Table 1. For all other dates the reported price change is based on the monthly WTI.</p>
<p>The fourth column of Table 1 summarizes key contributing factors in each episode. Many of these episodes were associated with dramatic geopolitical developments arising out of conflicts in the Middle East. Strong demand confronting a limited supply response also contributed to many of these episodes. The table collects the price increases of 1973-74 together, though in many respects the shortages in the spring of 1973 and the winter of 1973-74 were distinct events with distinct causes. The modest price spikes of 1969 and 1970 have likewise been grouped together for purposes of the summary....</p>
<p>These historical episodes were often followed by economic recessions in the United States. The last column of Table 1 reports the starting date of U.S. recessions as determined by the National Bureau of Economic Research. All but one of the 11 postwar recessions were associated with an increase in the price of oil, the single exception being the recession of 1960. Likewise, all but one of the 12 oil price episodes listed in Table 1 were accompanied by U.S. recessions, the single exception being the 2003 oil price increase associated with the Venezuelan unrest and second Persian Gulf War.</p>
<p>The correlation between oil shocks and economic recessions appears to be too strong to be just a coincidence (Hamilton, 1983a, 1985). And although demand pressure associated with the later stages of a business cycle expansion seems to have been a contributing factor in a number of these episodes, statistically one cannot predict the oil price changes prior to 1973 on the basis of prior developments in the U.S. economy (Hamilton, 1983a). Moreover, supply disruptions arising from dramatic geopolitical events are prominent causes of a number of the most important episodes. Insofar as events such as the Suez Crisis and first Persian Gulf War were not caused by U.S. business cycle dynamics, a correlation between these events and subsequent economic downturns should be viewed as causal. This is not to claim that the oil price increases themselves were the sole cause of most postwar recessions. Instead the indicated conclusion is that oil shocks were a contributing factor in at least some postwar recessions.</p>
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<p class="posted">Posted by James Hamilton at January 15, 2011 08:18 AM @ <a href="http://bit.ly/gJBiJo">http://bit.ly/gJBiJo</a></p></div>Monopoly Lessons by Goatmughttp://stockbuz.ning.com/articles/monopoly-lessons-by-goatmug2010-09-08T00:39:26.000Z2010-09-08T00:39:26.000ZStockBuzhttp://stockbuz.ning.com/members/1t2xbcvddkrir<div><p>Just too much good research to let it disappear. Get a cup of coffee, take the phone off the receiver and snuggle up. Reprinted from one of my favs <a href="http://slopeofhope.com/2010/09/monopoly-lessons-september-update-by-goatmug-.html">SlopeofHope</a></p>
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<p><strong>SEPTEMBER UPDATE</strong></p>
<p>Overall, we are seeing divergent data coming through as usual, so we'll have to wait and see where we fall. In general, I tend to believe the longer term theme that I've laid out that our economic situation for consumers is slowly grinding to a halt while big business is taking full advantage of the globalization of the world economy and managing to keep busy. I think this is why some of this data remains stubbornly positive despite what the average guy is feeling here in the US. The fact that large multi-nationals are diverse enough to show gains abroad is great and is really beneficial to the US economy, if we didn't have that, I think we'd be in a much worse position.</p>
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<p><strong>TOTAL RAIL TRAFFIC - <a href="http://railfax.transmatch.com/">http://railfax.transmatch.com/</a></strong></p>
<p>Rail traffic can reversed its season decline and all carriers have resumed their forward march. They still are 10%-20% less than the 2008 period, but they continue to improve. I need to find some truck shipping data because I have a feeling that trucking companies are opting to load their trucks on rails to save on transit costs. This obviously makes rail shipping look better.</p>
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<td style="TEXT-ALIGN: center"><a style="MARGIN-LEFT: auto; MARGIN-RIGHT: auto" href="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZnDRABII/AAAAAAAAAec/9AJvY0Roam0/s1600/TotalRails.gif"><strong><img border="0" alt="" src="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZnDRABII/AAAAAAAAAec/9AJvY0Roam0/s200/TotalRails.gif" width="200" height="115" /></strong></a></td>
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<p><strong>Total Rail Traffic</strong></p>
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<p><strong>MOTOR VEHICLES (RAIL TONNAGE)</strong></p>
<p>Auto shipments rebounded. As I mentioned last month, it looked like a seasonal decline was causing a drop. I'm interested to see what happens here in the next quarter as the green line really ramped higher last year. Is there pent up demand or will this begin to flat line?</p>
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<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://2.bp.blogspot.com/_D4auMwyGkow/TIZZpvP7q5I/AAAAAAAAAek/_HPpjhq4mMo/s1600/MotorVeh.gif"><strong><img border="0" alt="" src="http://2.bp.blogspot.com/_D4auMwyGkow/TIZZpvP7q5I/AAAAAAAAAek/_HPpjhq4mMo/s200/MotorVeh.gif" width="200" height="142" /></strong></a></p>
<p><strong>WASTE & SCRAP RAIL TONNAGE</strong></p>
<p>Interesting, it looks as though scrap shipments are coming back in line with the 2008 and 2009 level which leaves me wonder what was happening over the last few quarters to fuel the spike. I believe we will see the same trend happen with those auto shipments. Despite the leveling off of scrap shipments, scrap prices do continue higher. See the chart below for those details.</p>
<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://3.bp.blogspot.com/_D4auMwyGkow/TIZZl29XUmI/AAAAAAAAAeU/WEMxcc8H-aE/s1600/WasteandScrap-Rails.gif"><strong><img border="0" alt="" src="http://3.bp.blogspot.com/_D4auMwyGkow/TIZZl29XUmI/AAAAAAAAAeU/WEMxcc8H-aE/s200/WasteandScrap-Rails.gif" width="200" height="142" /></strong></a></p>
<p style="TEXT-ALIGN: left; CLEAR: both" class="separator"><strong>FOOD STAMPS (SNAP DATA) - <a href="http://www.fns.usda.gov/pd/34SNAPmonthly.htm">http://www.fns.usda.gov/pd/34SNAPmonthly.htm</a></strong></p>
<p style="TEXT-ALIGN: left; CLEAR: both" class="separator">Generally speaking, there is no change in the trend for government food stamp recipients. There is an ever increasing number of families on government assistance. I know things are rough and this is highlighting the divide between the haves and have nots. A person in the US does not need more tax write offs or rebates or enticements to buy more "green" energy stuff or other overpriced crap, they need jobs.</p>
<p style="TEXT-ALIGN: left; CLEAR: both" class="separator">41.2 million people are taking food stamps which is a total of 19.1 million households. Benefit costs per year continue to edge up at $5.5 Billion. The average household is receiving $287.00 a month in assistance<strong>.</strong></p>
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<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://4.bp.blogspot.com/_D4auMwyGkow/TIZZzpWNXTI/AAAAAAAAAfE/YGlaveUvLXo/s1600/FoodStamps+Chart+1.gif"><strong><img border="0" alt="" src="http://4.bp.blogspot.com/_D4auMwyGkow/TIZZzpWNXTI/AAAAAAAAAfE/YGlaveUvLXo/s320/FoodStamps+Chart+1.gif" /></strong></a></p>
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<p style="TEXT-ALIGN: left; CLEAR: both" class="separator"><strong>MONSTER EMPLOYMENT INDEX - http://about-monster.com/employment-index</strong></p>
<p style="TEXT-ALIGN: left; CLEAR: both" class="separator">We've commented on how the Monster Employment Index had been steadily improving as employers continued to buy advertising slots to fill their positions. Over the last two months we've seen a decline in the listings as June was the index high at 141. At the end of August we are at 136. This is still high end of the range for the last year, but clearly we've seen a softening.</p>
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<p style="TEXT-ALIGN: left; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZuxiJaYI/AAAAAAAAAe0/14i3LthynG8/s1600/MonsterIndex+Chart+1.gif"><strong><img border="0" alt="" src="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZuxiJaYI/AAAAAAAAAe0/14i3LthynG8/s320/MonsterIndex+Chart+1.gif" /></strong></a></p>
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<strong>HOUSING</strong></p>
<p>I am purposely omitting a discussion on housing. I am attempting to obtain approval to use a few charts that I found from a great blogger on the topic. As soon as he grants permission to copy the charts I'll make a post in the next week. Chart or no chart, the housing market is terrible.</p>
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<p><strong>WLI DATA -</strong> <a href="http://www.businesscycle.com/resources/"><span style="COLOR: #810081"><strong>http://www.businesscycle.com/resources/</strong></span></a></p>
<p>WLI data continues to flounder in the low 120's area. If you've followed any of the recent debate about the usefulness of their data you'd be completely confused. The ECRI folks have submitted that their data is not an indicator of a recession, or should I say they are saying that their data does not suggest a double dip, however they have consistently advertised that their data can predict recessions. I think we are simply seeing that all data is completely fouled up due to government influences in the market. The Fed and Treasury have flooded the markets with excess liquidity that is doing nothing for the general economy, rather propping up asset values (and doing a poor job of it too). These liquidity streams are really wreaking havoc with the WLI and also the Bloomberg Financial Conditions Index in my opinion. While overall data is weak, the components that deal with easy money availability are signaling that the good times are here. The conflicting information is causing these metrics to fail.</p>
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<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://3.bp.blogspot.com/_D4auMwyGkow/TIZZsTZ1OaI/AAAAAAAAAes/hz2a_KXcsPs/s1600/ST+WLI.gif"><strong><img border="0" alt="" src="http://3.bp.blogspot.com/_D4auMwyGkow/TIZZsTZ1OaI/AAAAAAAAAes/hz2a_KXcsPs/s320/ST+WLI.gif" /></strong></a></p>
<p><strong>MIT/MOODY'S COMMERCIAL PROPERTY INDEX - <a href="http://web.mit.edu/cre/research/credl/tbi.html">http://web.mit.edu/cre/research/credl/tbi.html</a></strong></p>
<p>MIT and Moody's data shows that all is not so good on a national level for commercial real estate. Price moves up have been met with corresponding drops. Overall, stock market prices for commercial real estate (CRE) have been doing wonderful this year, as I'm sure that much of the improvement has been a relief that the complete meltdown that everyone expected has not come. Yet, these are the exact times when we should be examining these investments that have had their relief rallies and now are left with a dose of reality. Perhaps it is wise to review shorts of several real estate investments?</p>
<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZxrOywCI/AAAAAAAAAe8/K734CvgYfX0/s1600/MIT-Moodys-CPPI.png"><strong><img border="0" alt="" src="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZxrOywCI/AAAAAAAAAe8/K734CvgYfX0/s320/MIT-Moodys-CPPI.png" /></strong></a></p>
<p><strong>COSTAR - <a href="http://www.costar.com/about/article.aspx?id=7719">http://www.costar.com/about/article.aspx?id=7719</a></strong></p>
<p>Costar is suggesting exactly the same. I like this chart because it breaks down the space by type of property. While there are regional improvements, especially in the Western US, the overall health of the CRE space is poor and declining.</p>
<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://3.bp.blogspot.com/_D4auMwyGkow/TIZaBHoKjMI/AAAAAAAAAf0/CmIldu-24gc/s1600/Costar-PropertyTrendsbyType.jpg"><strong><img border="0" alt="" src="http://3.bp.blogspot.com/_D4auMwyGkow/TIZaBHoKjMI/AAAAAAAAAf0/CmIldu-24gc/s320/Costar-PropertyTrendsbyType.jpg" /></strong></a></p>
<p><strong>SCRAP METALS COMPOSITE - <a href="http://www.scrap.net/cgi-bin/composite_prices.cgi?id=100000&num=5">http://www.scrap.net/cgi-bin/composite_prices.cgi?id=100000&num=5</a></strong></p>
<p>As we've covered several times, Alan Greenspan used scrap metal as a way to take the economic "temperature" of the economy. We continue to see prices rise here, but I'll be watching for a breakout above these levels to signal that some real recovery activity might be going on. All in all this may be a reflection of international demand and dollar weakness.</p>
<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://2.bp.blogspot.com/_D4auMwyGkow/TIZZ65XKBgI/AAAAAAAAAfk/bo9PNOT7hRk/s1600/CompositeScrap-Sept3.gif"><strong><img border="0" alt="" src="http://2.bp.blogspot.com/_D4auMwyGkow/TIZZ65XKBgI/AAAAAAAAAfk/bo9PNOT7hRk/s320/CompositeScrap-Sept3.gif" /></strong></a></p>
<p><strong>BALTIC DRY GOODS SHIPPING - <a href="http://www.bloomberg.com/apps/quote?ticker=BDIY:IND">http://www.bloomberg.com/apps/quote?ticker=BDIY:IND</a></strong></p>
<p>Speaking of international demand, we are seeing continued improvement in the BDI. I'm still bullish on pricing for this index to go higher. If you are looking at this space as an investment, remember that few shippers are leveraged to this metric as they've contracted out their fleets for longer term deals. There are a couple of shippers that are tied more to the daily rate and you should do some homework on those names. The bottom line here is that most shippers are leveraged to an extreme and they are subject to dividend cuts (which is why many people own these types of firms). So, faced with a cut of dividend and high leverage, I tend to shy away from these firms. Although one can argue that with pricing as bad as it it now, there is only one way to go and it is up!</p>
<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZ3bTzHDI/AAAAAAAAAfU/aAk3HFalINk/s1600/Baltic.png"><strong><img border="0" alt="" src="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZ3bTzHDI/AAAAAAAAAfU/aAk3HFalINk/s320/Baltic.png" /></strong></a></p>
<p><strong>1 WEEK LIBOR -</strong> <a href="http://www.homefinance.nl/"><strong>www.homefinance.nl</strong></a></p>
<p>Despite rumors of poor banking lending in Europe and around the world, we continue to see 1 week Libor and all other dates come in. This would normally be an indicator of health in the system as bankers are "trusting" each other more and therefore demanding less of an interest rate for 1 week exposure. As mentioned above, government interference in this space causes me to question any rate or improvement I see, especially with the concerns that European banks may need more capital. While this is USD Libor, we are seeing the same rate reductions in all rate curves.</p>
<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://3.bp.blogspot.com/_D4auMwyGkow/TIZZ5VEVH4I/AAAAAAAAAfc/Mbvb9FpTBOg/s1600/1WK-Libor.jpg"><strong><img border="0" alt="" src="http://3.bp.blogspot.com/_D4auMwyGkow/TIZZ5VEVH4I/AAAAAAAAAfc/Mbvb9FpTBOg/s320/1WK-Libor.jpg" /></strong></a></p>
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<p><strong>US FINANCIAL CONDITIONS INDEX - <a href="http://www.bloomberg.com/apps/quote?ticker=BFCIUS:IND">http://www.bloomberg.com/apps/quote?ticker=BFCIUS:IND</a></strong></p>
<p>The USCI has edged above 0 again which would suggest that we are now in recovery mode and in an expansion! HA! As mentioned with WLI, I have to question it. The big move is a result of the rebound in the stock market over the last week. As we have covered, this is exactly the strategy of the Fed, if asset values move higher, people believe that the recovery is in. Once they believe the recovery is in, they spend like crazy adding to their debt and spending beyond their means for instant gratification! I'm not buying it and Mom and Pop are not buying it either. We'll continue to watch this one.</p>
<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZ1tPmtcI/AAAAAAAAAfM/C3_lgIKvqFk/s1600/FINCOND.png"><strong><img border="0" alt="" src="http://1.bp.blogspot.com/_D4auMwyGkow/TIZZ1tPmtcI/AAAAAAAAAfM/C3_lgIKvqFk/s320/FINCOND.png" /></strong></a></p>
<p><strong>COPPOCK TURN INDICATOR</strong></p>
<p>Since I posted the Coppock turn signal in June there has been no looking back. The signal continues to suggest that you should be out of the market rather than in. The thing has a decent track record, but won't get you in early on the turns because it is based on a 14 month average, however, on big swings it does give you decent signals.</p>
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<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://3.bp.blogspot.com/_D4auMwyGkow/TIZaEuIgqGI/AAAAAAAAAf8/0h3j2Zy9Zl0/s1600/CoppockGraph+Chart+1.gif"><strong><img border="0" alt="" src="http://3.bp.blogspot.com/_D4auMwyGkow/TIZaEuIgqGI/AAAAAAAAAf8/0h3j2Zy9Zl0/s320/CoppockGraph+Chart+1.gif" /></strong></a></p>
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<p><strong>S&P 500 15 DAY / 40 DAY EMA CROSSOVER</strong></p>
<p>Last week's rally has put another bearish chart into question. We'll need to watch this set up as I type this today, the signal will go back to bearish. As many know, one of my favorite bloggers Chris Puplava suggests that a very long term signal for market declines is the 15/40 Crossover on a weekly chart confirmed with a sub-50 RSI. As I posted several weeks ago, we did get that signal in the S&P500. I wanted to post this here because you might get the sense that I'm bearish (and that would be correct), but I want to make sure that I'm not caught leaning one way when it really is a false signal. Of real importance is that the DOW has NOT crossed over and therefore is not confirming the action in the S&P500.</p>
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<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://2.bp.blogspot.com/_D4auMwyGkow/TIZuxbt0BCI/AAAAAAAAAgM/6VOCu5Ddo58/s1600/ScreenHunter_03+Sep.+07+11.55.gif"><strong><img border="0" alt="" src="http://2.bp.blogspot.com/_D4auMwyGkow/TIZuxbt0BCI/AAAAAAAAAgM/6VOCu5Ddo58/s320/ScreenHunter_03+Sep.+07+11.55.gif" width="320" height="283" /></strong></a></p>
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<p><strong>USD -<a href="http://www.bloomberg.com/apps/quote?ticker=DXY:IND">http://www.bloomberg.com/apps/quote?ticker=DXY:IND</a></strong></p>
<p>The US dollar has almost lost all of its gains made in that last several months. How easy it was for Fed President Bullard and Chairman Bernake to slash the value of the dollar! This is clearly much of the fuel for the launch in gold prices. So remember we now have two keys reasons why gold is favored. First, it is not the dollar and not the Euro, and second it possesses the characteristics that benefit from the Fed strategy of debasement.</p>
<p><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://2.bp.blogspot.com/_D4auMwyGkow/TIZZkbkgckI/AAAAAAAAAeM/pH8O8TYy7Eo/s1600/USD.png"><strong><img style="DISPLAY: block; MARGIN-LEFT: auto; MARGIN-RIGHT: auto" border="0" alt="" src="http://2.bp.blogspot.com/_D4auMwyGkow/TIZZkbkgckI/AAAAAAAAAeM/pH8O8TYy7Eo/s320/USD.png" /></strong></a></p>
<p><strong>TREASURIES (TLT)</strong></p>
<p>Treasuries continue to remain above the levels that suggest stress in the financial system. While TLT trades higher we must acknowledge that much of the gap higher is related to the Fed's QE program where they buy treasuries. Of course this incited a stampede to get in front of the FED so we have traded down a bit once the rush abated. I have spoken with several people that want to short treasuries or buy TBT but I would caution against this trade unless it is very short term in nature. What we all need to understand is that this program is here for the long haul and we'll continue to see record setting low rates across the spectrum of the debt curve. We will see 3.25% or 3.5% 30 year mortgages and to have that come to fruition, we'll need to see TLT go higher.</p>
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<p style="TEXT-ALIGN: center; CLEAR: both" class="separator"><a style="MARGIN-LEFT: 1em; MARGIN-RIGHT: 1em" href="http://2.bp.blogspot.com/_D4auMwyGkow/TIZfeXtwGtI/AAAAAAAAAgE/JFyPRDs_kdA/s1600/ScreenHunter_02+Sep.+07+10.51.gif"><strong><img border="0" alt="" src="http://2.bp.blogspot.com/_D4auMwyGkow/TIZfeXtwGtI/AAAAAAAAAgE/JFyPRDs_kdA/s320/ScreenHunter_02+Sep.+07+10.51.gif" /></strong></a></p>
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<p><strong>TRADING UPDATE</strong></p>
<p>As bearish as things are beginning to look, I am very concerned when it seems like the entire universe shares my pessimistic view. I was noting that last week and guess what, we got a big rally! Fortunately I continued to stay long in the emerging markets strategy I've advocated since July and have rebounded nicely. In fact, holdings in Singapore and Malaysia continue to outperform. As we enter September I am going to scale out of positions, or if I retain them, will marry them to a short position to have downside coverage. I still like corporate debt, but so does everyone else, so I haven't added any bonds to my portfolio in a long time and don't anticipate adding unless I see something come out that is being unloaded by a distressed seller.</p>
<p>For longer term trades, I still believe 100% in my anti-US strategy of going long emerging markets and gold. The Fed has put us on notice that they will monetize debt and drive the value of the dollar down in an attempt to stimulate, stimulate, stimulate!</p>
<p>I had an interesting conversation with a few professional oil and gas traders last week. They reflected that this has been one of the toughest trading years that they can recall. They were very concerned that top notch guys were getting blown up with the wild swings from day to day. They commented that several big firms were really in bad shape. It is these types of conversations that continue to keep me out of oil and gas because you can be directionally correct, but have someone blow up and move the entire market against you.</p>
<p><strong>MONOPOLY AND THE BEAR MARKET OF 2010</strong></p>
<p>This is dangerous work and it pays to be cautious, patient, and above all protect your capital. I played an online version of Monopoly with my kids the other day and we had an unusual experience that is an example of what will happen in real life in the coming years.</p>
<p>In our online game a computer player landed on an unowned space and he decided that he did not want to buy the property. In our example, when the buyer doesn't want the property, it is sent to auction where all of the other players can bid on it. (Perhaps the real game is like this too, but I never remembered that). In our game we really wanted this Boardwalk-like property and had lots of cash to purchase it since we'd had terrible luck with our rolls. All of the other players were really strapped for cash since they had bought other properties due to their good rolls. Since I'm teaching them "economics and game theory" we entered a clever bid in hopes of stealing this prime property on the cheap. What happened next was very unusual. As the time to enter bids expired we received a notice on the screen that we were the only bidder for the property and therefore bought it for almost nothing!</p>
<p>The message is simple and clear. In Monopoly and in real life bear markets, there will be opportunities, you need to have cash to be able to take advantage of them. Patience is a trade so protect your capital! Check out other posts in the next few days at <a href="http://www.goatmug.blogspot.com">www.goatmug.blogspot.com</a></p>
<p>Be careful!</p>
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