Thursday, March 22, 2012
Even though Saudi Arabia is pumping out the most crude in decades and even though Libyan crude lost during the recent civil unrest is coming back on line, there's just not enough out there to meet demand in the U.S., Europe and emerging economies like China, India and elsewhere.
Brent futures for May delivery are trading around $124 a barrel, while U.S. crude is hovering around $107 a barrel.
The actual price when money changes hand and the oil is shipped can be higher in many cases, and could hit $200.
"The seaborne oil market is extremely tight," a trader tells CNBC.
"As much as the politicians love blaming speculators, if the market was up on speculation and not fundamentals, the physical market would be trading at a discount."
Analysts at Goldman Sachs agree.
"We expect fundamentals will continue to tighten during 2012,” the firm says in a report, adding supply issues were "pushing prices toward our 2013 Brent crude oil price target of $130 [per barrel]. With OPEC spare capacity and inventories low, the balance of risk to crude oil prices remains skewed to the upside."
A growing U.S. economy is also pressuring prices higher, as a healthier country needs more oil and derivatives to expand.
If unemployment rates continue to fall and other indicators surprise on the upside, crude will keep on climbing globally, especially if tensions with Iran drag on.
"The market is anticipating additional favorable U.S. economic news," energy trader and consultancy Ritterbusch and Associates says in report, according to the Associated Press.
"And until concerns ease regarding Iranian risk, the market appears capable of maintaining price gains, especially if equities remain strong."
Lindsey Williams is back on Goldseek radio 20 march 2012 with some very fresh insights from his sources about the financial collapse the death of the dollar before the end of 2012 the price of oil and gasoline , Lindsey Williams this time reveals the name of one of his elite sources a long time Wall street insider , the plan of the elite who are delaying the total financial collapse because they want to have every country every city in America in so much debt that when the collapse happens they will have no choice but to accept the NWO new currency and conditions , Pastor Lindsey Williams also predicts hyperinflation in America before the end of 2012 , the US dollar will become practically useless as the prices of goods will sky rocket , gold and silver are the elite's money everything else is just paper and whatever is printed on paper is worth the paper it is printed on says Lindsey Williams
In yesterday's Globe and Mail, Martin Middlestaedt says Japanese yen's 40-year bull market is at a turning point. He also writes about betting against (shorting) the yen and in favour of risky assets. The recent decline (Dennis Gartman believes this is a trend to hitch hike on) of the yen is not only a welcome break for Japanese exporters, and currency speculators wishing to capitalize on its falling valuation; it is a welcome development (risk-on) for hedge funds, as it provides a basis for a resurgence in short-yen carry trades.
Here are some snippets:
- Dennis Gartman, is convinced that the long advance of the yen is finally over. He’s urging investors to sell the currency short, a trade he thinks will work for years as Japan’s economic problems continue to grow and the currency takes a drubbing.
– “I think it’s the trade of the next 10 years,” says Mr. Gartman of the Gartman Letter, a market advisory service. “The yen is doomed fundamentally. Japan just has so many problems, none of which are going to go away anytime soon.”
– Its government debt is twice the size of its GDP, the scariest ratio in the developed world. To make matters worse, its lofty currency is an obstacle for its exporters, it has been fighting persistent deflation, and its population is aging rapidly.
– “This is one of the slowest moving train wrecks in the history of finance, but we’re just not quite sure when it clicks over,” says Andrew Busch, global currency strategist at Bank of Montréal’s investment arm.
– Camilla Sutton, chief currency strategist at Scotia Capital, says sentiment “used to be quite bullish for yen for a very long time,” but the market view has “turned wildly negative just over the last few weeks.”
– Much of the yen weakness occurred after the Bank of Japan said in February that it would buy ¥10-trillion worth of government bonds – in effect printing money to finance the government’s debt.
– Another approach advocated by Mr. Gartman has been to buy futures contracts on gold and other commodities and simultaneously sell Japanese yen futures. If he buys contracts representing $1 million in gold, he then sells futures contracts on yen worth $1 million. “You create your own synthetic derivative” that allows purchases of assets in yen terms, he says of the strategy. “Generally I think you should buy assets in yen terms across the board.”
– These somewhat complicated trades will have supersized payouts if the yen falls and the various commodities rise, but will suffer large losses if the yen strengthens and commodity prices weaken.
– Mr. Gartman says there is an additional reason the yen will likely continue to be weak: Japanese companies want a cheaper currency to make exports more competitive. “Clearly, the Japanese corporate structure wants a weaker yen. They’re obviously cheering this on.”
- Energy costs above 9% of global GDP = recession
- Financial crisis has transitioned to social and political crisis
- Global growth will peak by May, then watch out below
About the Guest: Ambrose Evans-Pritchard is International Business Editor of The Daily Telegraph. He has covered world politics and economics for 30 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. Read his latest articles, CLICK HERE
All of Wall Street's wildly bullish calls on stocks may be having just the opposite effect, driving wary mom-and-pop investors out of the market despite the long-standing rally.
After all, they've been down this road before: One big-name analyst after another advocates a buy, buy and buy some more strategy, only to see a bubble burst that ends up trapping late-to-the-game individual investors.
True to form, Wall Street's biggest investment houses have been marching to the podium with avid encouragement to put money to work.
Goldman Sachs' Peter Oppenheimer drew headlines Wednesday for releasing a note in which he says stocks are presenting a once-in-a-generation buying opportunity. Similarly, Bank of America and Credit Suisse recently have taken up their full-year projections for the Standard & Poor's 500 (INDEX: ^GSPC - News). JPMorgan Chase has remained strongly bullish, and BlackRock CEO Larry Fink several weeks ago said investors should have a total allocation to stocks.
The admonitions haven't worked among retail investors.
In just the last week alone investors pulled another $126 million out of stock-based mutual funds and shoveled $10.7 billion into bond mutual funds, according to the Investment Company Institute.
The total outflow from stock funds was comparatively small to recent weeks, but the move is significant in that U.S-based stock funds, despite a stunning gain of more than 30 percent off the October lows, lost nearly $1.4 billion.
"There's a feeling that another shoe is going to drop somewhere, and they don't want to be caught in a situation where they can't get out," says Quincy Krosby, chief market strategist at Prudential Annuities in Newark, N.J. "What they don't want to get involved in is some trap that is being set by hedge funds or asset managers to get in so (the managers) can get out."
Retail investors can be forgiven for feeling a little shell-shocked.
They just survived a decade in which two major bubbles popped - the dotcom mania and the subprime mortgage frenzy - and they worry that the stock market now is being fueled again by easy money from the Federal Reserve that ultimately will run out and leave them holding the bag.
"A lot of people are very skeptical. Look how wrong these guys were last year," says Kathy Boyle, president of Chapin Hill Advisors in New York. "The average individual is feeling there's a lot of propaganda going on."
Indeed, consensus forecasts in 2011 were looking for the S&P 500 to finish around 1,400 when in fact it registered an almost perfectly flat 1,257, a 10 percent miss.
Investors may have had a strong sense of deva vu - that was almost exactly where the index registered on Jan. 20, 1999.
"They suffered through everybody being bullish and telling them they could not lose at the top of the Internet bubble, then they suffered through everybody telling them you could not lose at the top of the financial bubble," says Walter Zimmerman, senior technical analyst at United-ICAP in Jersey City, N.J. "At this point, they're way past once-burned twice-cautious."
Of course, the retail reticence in the market is about more than not trusting Wall Street bullishness. But it certainly appears to be playing a role.
Zimmerman believes the depletion of U.S. savings accounts has made less money available for investors to put in the market.
Boyle, meanwhile, says mutual fund flows may not be painting an entirely correct picture about retail participation, given that many have flocked to exchange-traded funds.
Yet U.S.-based mutual funds actually have attracted more assets even as the ETF field has bloomed to a $1.2 trillion industry. Mutual funds held $8.6 trillion in assets as of February, an increase from just under $8 trillion in 2011, according to Morningstar.
The rally, then, appears in large part to be driven by the high-frequency trading platforms that big investors use, as well as a burgeoning level of corporate stock buybacks.
Repurchases hit an 11-month high of $5.3 billion a day last week and have totaled $33.5 billion in March alone, with big banks that cleared the Fed stress tests the most active participants, according to TrimTabs.
So what will bring mom and pop back into the fold?
Prudential's Krosby thinks more consistent improvements in the economic data, along with a surge in dividend offerings and a better entry point that would come with a healthy correction could entice the retail investor.
"If we were to see a pullback, a consolidation, then you might see many of the investors come in, provided the economic data continue to remain solid," she says.
"What doesn't help is when you hear CEOs or asset managers saying, 'Start pushing all your money into equities.' They look at that as suspect," Krosby adds. "They see those comments as a marketing ploy to lure them in, and they're very suspect of headlines like that."
The "Chart of the Day" is Cisco Systems (CSCO), which showed up on Tuesday's Barchart "52-Week High" list. Cisco on Tuesday posted a new 13-month high of $20.64 and closed up 2.14%. TrendSpotter issued a new Buy signal on Tuesday's close of $20.57. In recent news on the stock, Cantor on March 6 initiated coverage on Cisco with a Buy rating and a target of $22.50. Wells Fargo on March 16 reiterated its Outperform rating on Cisco and issued a favorable opinion on Cisco's acquisition of NDS Group for $5 billion, which it said gives Cisco attractive video assets. Cisco Systems, with a market cap of $107 billion, is the worldwide leader in networking for the Internet.
Federal Reserve Chairman Ben Bernanke is trading in his chairman hat for that of a college professor. Bernanke has given the first of four lectures to students at George Washington University. Four times starting Tuesday, Bernanke will take a break from his day job to revisit the academic life he led -- and, by all accounts, enjoyed -- before coming to Washington a decade ago. He'll stand before a class of George Washington University undergraduates and deliver a series of lectures on the Fed.