| Date | Time (ET) | Statistic | For | Actual | Briefing Forecast | Market Expects | Prior | Revised From |
| Apr 5 | 10:00 AM | ISM Services | Mar | - | 59.0 | 59.5 | 59.7 | - |
| Apr 5 | 2:00 PM | Fed Minutes | Mar 15 | - | - | - | - | - |
| Apr 6 | 7:00 AM | MBA Mortgage Index | 04/01 | - | NA | NA | -7.5% | - |
| Apr 6 | 10:30 AM | Crude Inventories | 04/02 | - | NA | NA | 2.945M | - |
| Apr 7 | 8:30 AM | Initial Claims | 04/02 | - | 400K | 386K | 388K | - |
| Apr 7 | 8:30 AM | Continuing Claims | 03/26 | - | 3700K | 3700K | 3714K | - |
| Apr 7 | 3:00 PM | Consumer Credit | Feb | - | $2.0B | $2.5B | $5.0B | - |
| Apr 8 | 10:00 AM | Wholesale Inventories | Feb | - | 0.5% | 1.0% | 1.1% | - |
Tuesday, April 5, 2011
US Economic Calendar For The Week
Saturday, April 2, 2011
Goldman Raises Corn Price Forecast By 30% Just As Corn Surges To Highest Since 2008 Food Crisis
Unprecedented strength in corn continues, with futures rising by 4.5% on Thursday, following strong demand for corn to make food and fuel. That demand has whittled down the corn supply, which was already at its lowest level in 15 years in the United States, the world's top exporter of the grain. Per Reuters: " Demand has been strong from the livestock and ethanol sectors, and from importing nations, including China which is believed to have purchased 1.25 million tonnes last week. This week's rally, triggered by the U.S. Agriculture Department's lower-than-anticipated quarterly U.S. corn stocks estimate on Thursday, rekindled worries about food price inflation. The near-term supply concerns have largely overshadowed USDA's forecast that U.S. farmers will plant the second-largest corn acreage since 1944." Yet whether due to fundamental reasons or pure momentum, Goldman has just added more fuel to the fire by raising its corn price forecast, after having lowered it a whopping 10 days ago, from $6.00/bu and $5.80/bu to $7.80/bu and $7.00/bu, for 6 and 12 months respectively. Of course, all those who followed Goldman's recent downgrade made some very inverse profits. So it may well be time to trade against the squid yet again.
From Goldman Sachs:
The USDA Grain Stocks report featured corn stocks significantly below consensus expectations. These tighter old-crop inventories will require higher prices in the short term to finally ration demand. Further, despite corn winning the acreage battle, we reiterate our expectation for only a modest build in corn inventories in 2011/12. As a result, we raise our corn price forecasts to $8.60/bu in 3-mo, $7.80/bu in 6-mo and $7.00/bu in 12-mo. We recommend that consumers take advantage of the current backwardation in the corn futures curve to enter into longer-dated hedges.
Old-crop corn significantly tighter than expected…
The real surprise in yesterday’s USDA reports came from corn stocks, which were below the low end of expectations. This confirms that recent high prices have yet to achieve a slowdown in feed demand, and with strong weekly ethanol and export demand, point to a further drawdown in old-crop inventories. As a result, we believe that corn prices need to rise strongly in the near term to ration demand, including feed. Accordingly, we are raising our 3-mo corn price forecast to $8.60/bu. We expect ethanol demand rationing will be harder to achieve, as a $3.00/gal RBOB price and a $0.45/gal blender tax credit require prices above $10.00/bu to push the ethanol production cost above the price of gasoline.
… leading us to raise our corn forecasts despite acreage gains
We had lowered our new-crop corn price forecast on March 20, on the view that stabilizing inventories, as reported in the Feb/Mar WASDE, and higher acreage would allow for a modest inventory build and in turn moderately lower prices in 2011/12. While we maintain our outlook for the 2011/12 corn supply response, lower beginning stocks mean that our forecast for a sequential modest decline in prices will start from a higher level. As a result, we raise our 6- and 12-mo price forecasts to $7.80/bu and $7.00/bu from $6.00/bu and $5.80/bu previously, above the current forward curve.
Focus now shifts to weather, with price risk skewed to the upside
In the short term, the focus will be on precipitation in the Midwest as wet conditions lead farmers to swap corn for soybean acreage. Further, lower inventories suggest strong asymmetry in the price response to weather: it would take very favorable weather to push new-crop prices significantly lower than our new forecast, while any weather disappointment will limit inventory build and push corn prices even higher to further ration demand. We therefore recommend investors and consumers layer in upside exposure/hedges in Dec-11 corn prices.
In other words it is likely time to sell it all...
Federal Reserve president spooks market: Says Fed could raise rates by 75 bps this year...
Minneapolis Fed's Kocherlakota, who is not scheduled to speak today, and who in the past has exhibited both hawkish and dovish tendencies is on the wire, saying the the Fed Funds rate may need to rise 75 bps by late 2011. He is also quoted as saying that QE2 boosted inflation expectations more than he anticipated (oh look, another confirmation of Fed ineptitude but only in retrospect), and that higher short-term rates certainly possible in late 2011. In other words, the hawks in the Fed are once again getting very vocal... Just like in March of 2010, and before the market tanked, opening the door for QE2, and when all the hawks kept their mouths shut.
From MarketWatch:
Narayana Kocherlakota, in an interview with Dow Jones Newswires and The Wall Street Journal, said that if the U.S. economy grows at about 3% this year, as he expects, and underlying inflation ticks higher, as he expects, then the Fed will end its $600 billion bond-buying program as planned in June.
He expects core inflation (inflation excluding volatile food and energy prices) will rise from about 0.8% late last year, when the Fed launched its bond-buying to about 1.3% by year end, he said. As a result, lifting the Fed's target for short-term interest rates by more than half a percentage point late this year is "certainly possible." He noted that the often-cited Taylor Rule, named for the Stanford University professor who devised it, would in that circumstance call for a ¾-percentage-point increase in rates.
"If you consider monetary policy was appropriate at the end of 2010...and then you see core inflation go up by 50 basis points over the course of 2011..the usual response that we know from 20 years of thinking about monetary policy (or even more) is to raise the target rate by even more than that increase in observed inflation," he said. "So that means you should be raising the target rate by more than 50 basis points."
The Fed dropped its short-term interest-rate target nearly to zero in December 2008 during the financial crisis, and promised to keep it there for "an extended period." Trading in futures suggests markets anticipate a Fed increase to 0.5% early in 2012.
Mr. Kocherlakota is one of the five regional Fed presidents with a vote on monetary policy this year, along with the Washington-based Fed governors. He is a swing voter on the Fed's policy committee, who isn't clearly aligned either with hawkish Fed officials who tend to favor tighter credit or dovish members who tend to favor looser credit
Two other regional Fed presidents with votes—Charles Plosser of Philadelphia and Richard Fisher of Dallas—have expressed concerns about inflation and suggested they would favor raising rates in the near future.
The Minneapolis Fed president, a former academic, said he expects a "pretty big upward movement" in core inflation—that is inflation excluding volatile food and energy—which he considers the best predictor of where overall inflation is.
Mr. Kocherlakota also said that the Fed's second-round of bond buying, known as QE2 for "quantitative easing," was more potent than he anticipated when he and other Fed officials launched it last year. It raised near-term inflation expectations, then dangerously low in his view, by more than he anticipated, measured by financial market indicators.
Mr. Kocherlakota said when the Fed decides to tighten monetary policy, he favors raising short-term interest rates over selling assets by the Fed's portfolio, primarily because the Fed has a firmer understanding of how interest rates affect the economy.
All-clear signal from the Dow Theory?
It certainly looks that way Friday morning, with the Dow Jones Industrial Average (DOW:DJIA) finally surpassing its February closing high of 12,391.25 — after having failed to do so in its two previous attempts.
In fact, if the Dow can hold on through the close and remain above that previous high, then the venerable Dow Theory will have flashed an all-clear signal for the market.
The Dow Theory, of course, is the oldest stock-market-timing system that is still in widespread use. It focuses on the action of both the Dow industrials and the Dow Jones Transportation Average (DOW:DJT) .
Dow Theorists focus particular attention on how these two benchmarks behave after any market correction. It’s considered a bearish omen if either or both fail to surpass their pre-correction highs, and it’s an all-clear signal when both eclipse their respective highs.
Friday is the third consecutive day in which the market has come close to generating such an all-clear signal. The transports finally surpassed their previous high as of Thursday’s close, and the industrials came awfully close on both Wednesday and Thursday — though in each case, they fell short by the close.
Many would have found it disappointing if the Dow Jones Industrial Average went into the weekend having failed a third time.
For now, at least, it looks as though the bulls can save their disappointment for something else.
In fact, if the Dow can hold on through the close and remain above that previous high, then the venerable Dow Theory will have flashed an all-clear signal for the market.
The Dow Theory, of course, is the oldest stock-market-timing system that is still in widespread use. It focuses on the action of both the Dow industrials and the Dow Jones Transportation Average (DOW:DJT) .
Dow Theorists focus particular attention on how these two benchmarks behave after any market correction. It’s considered a bearish omen if either or both fail to surpass their pre-correction highs, and it’s an all-clear signal when both eclipse their respective highs.
Friday is the third consecutive day in which the market has come close to generating such an all-clear signal. The transports finally surpassed their previous high as of Thursday’s close, and the industrials came awfully close on both Wednesday and Thursday — though in each case, they fell short by the close.
Many would have found it disappointing if the Dow Jones Industrial Average went into the weekend having failed a third time.
For now, at least, it looks as though the bulls can save their disappointment for something else.
How to Beat the Stock Market by Following Five Simple Rules
Keith Fitz-Gerald writes: Most investors operate on some variation of the "set it and forget it strategy."
And that's why - more often than not - they're surprised by the terrible things that happen to their money when the stock market stumbles.
But it doesn't have to be that way.
Studies show you can dramatically boost your performance and potentially beat the stock market by following five simple rules.
Those five rules are:
1.Set goals and monitor your progress.
2.Concentrate your assets.
3.Structure your portfolio and rebalance at least yearly.
4.Use trailing stops to limit risk.
5.Don't chase the train if it's already left the station.
Breaking Down the Fab Five
Rule No. 1: Set Goals and Monitor Your Progress: Most investors have no understanding of where they've been - let alone where they want to be. So start out by figuring out where you want to wind up. Then craft a plan that helps you get there.
For instance, if you really want above-average income, don't waste your time with growth-only choices that pay no dividends. Various studies show that dividends and reinvestment can contribute as much as 97% of total long-term stock-market returns.
Similarly, if data shows that 75% of the world's economic activity now takes place outside U.S. borders, investors who have only 6% of their holdings in international stocks will end up with a substandard portfolio. For decades, we've heard over and over how international investments should comprise 5%, 10% or at most 15% of our portfolio's total value. Any more than that is foolhardy and risky, the pundits tell us.
Yet, best-selling author and famed Wharton Business School Professor Jeremy Siegel believes that such long-held conventional wisdom on international investing should be thrown right out the window. In fact, an allocation of 40% or more may be more appropriate, Siegel says. And that matches my own research.
Rule No. 2: Concentrate Your Assets: Many investors are familiar with the concept of "diversification"- or, at least the form that Wall Street practices. Common wisdom tells you to spread your assets around, reasoning that this will protect you from a single catastrophic loss. But that's actually akin to rearranging the deck chairs on the Titanic. No wonder investing icon Warren Buffett reportedly quipped that "diversification is for people who don't know what they are doing."
Like Buffett, I think it's far more important to concentrate your assets. In doing so, you're investing in a more limited list of things that you can better understand, keep tabs on, and react to. That also suggests that you're investing in the certainty of projected returns, rather than trying to protect your money against things you can't control in the first place.
That's why I advocate investing in globally unstoppable trends with literally trillions of dollars behind them. I'll bet you can probably name most of them with relative ease: Inflation, global commodities and natural resources, the emergence of China and its effect on global earnings, bond bubbles, population growth, and more. My good friend and Money Morning colleague, Larry D. Spears, described eight such trends - and accompanying investments - in a two-part report just this week [Editor's Note: Readers can access Part I or Part II of the aforementioned series by Spears, right from here, free of charge.]
Rule No. 3: Structure Your Portfolio and Rebalance at Least Yearly: Most investors get caught up in one of two extremes. Either they "over-manage" their portfolios, and wind up trying to maneuver through every possible swing, shimmy, and shake the market throws at them - usually with limited success. Or they don't pay any attention whatsoever - and when they finally do examine their statements, they're left to wonder why their 401(k) turned into a 201(k).
To properly structure your assets, consider a simple, proven model - such as the 50-40-10 strategy we recommend here at Money Morning, as well asin our sister publication, The Money Map Report. Because you've got three clearly defined "tiers" to play with, every investment has a place - and a specific role - in your portfolio. [Editor's Note: For a full report on this investing model, please click here. It, too, is available free of charge.]
The 50-40-10 pyramid that represents our investment model is a lot like the "food pyramid" many of us remember as kids.
The stuff on the bottom - the 50% we assign to safety and balance - is the food that tastes like wallpaper paste, but that your mom insisted (and correctly so) "was good for you."
The middle layer - the 40% we put in global income and growth - is the stuff that actually tastes great and is stuff you want more of. The top 10% - the wild "rocket riders" - is the beer and chips, the chocolate mousse, or whatever other delight you can envision.
If you examine your statements and find that one segment - the 50, the 40, or the 10 - has gotten too large, it's a simple, self-reinforcing matter to sell some of your winners and redistribute that money into new choices to bring your money back into balance.
There's another benefit, too. When used properly, a strategy such as the 50-40-10 ensures that you achieve the three goals that are common to all successful investors. In short, you:
•Maintain discipline - in an automated way.
•Generate higher-than-average income.
•And achieve a greater overall stability for your portfolio.
That's not to say that a 50-40-10 portfolio can't come under pressure if the markets do. But we can say that, over time, the comparative stability it creates can help you avoid surprises that clobber most investors and doom them to sub-par returns.
Rule No. 4: Use Trailing Stops to Limit Risk: Think of it as a plumber would. Big losses - like water in your living room from a broken pipe - are expensive and tough to recover from. They can set you back years, which is why it's best not to incur them in the first place.
Instead, do what the world's most successful investors do - focus the majority of your efforts on avoiding losses in the first place. Success here will really make a difference, especially when you consider that most investors have been halved twice in the last decade - once from 2000-2003 and again from 2007-2009.
The simplest way to avoid catastrophic losses is through the use of protective or "trailing" stops.
Trailing stops work in one of two ways. You can set them at a certain percentage or absolute dollar amount below your purchase price when you first buy a stock or other security. And if that stock starts to run, you can "slide" it up, and keep it at a certain percentage below the current price.
In either case, the "stop" establishes a certain price at which you will "exit" the position - automatically and with no questions asked.
For instance, we advocate a 25% trailing stop, which means that if we buy shares in "XYZ Corp.," and XYZ falls 25% from our initial purchase price, we're out - no emotion, and no potential for vacillating with indecision as the loss widens.
Similarly, if we've owned XYZ for years, and it's risen tremendously, we'll move our trailing stop up in lockstep. That way, we'll keep at least some of those profits, should the stock ever fall more than 25% from its successfully higher peaks.
With today's technology, there's simply no excuse for not employing trailing stops as a means of protecting your savings. Almost every broker now offers software or the online capability to easily establish and monitor your investments, including the use of trailing stops.
Rule No. 5: Don't Chase the Train If It's Already Left the Station: Most investors have an uncanny knack for doing exactly the wrong thing at precisely the worst possible moment - meaning they buy or sell at times that inflict the greatest amount of financial damage on themselves. That's why it's well documented that investors sell at market bottoms and buy when things have already run up (and are ready to reverse).
Given human nature, that's completely normal.
But that doesn't mean you can't avoid such emotional pitfalls in your own investing.
That's especially true now, when many investors are trying to make up lost ground by piling in at a time when the U.S. Federal Reserve has its foot on the gas in a well-intentioned but ultimately misguided effort to re-inflate the markets and stimulate our economy.
The way I see it, piling into stocks in a wholesale fashion right now is like running down the platform in an attempt to catch a train that left the station in March 2009 - after the market has gained 95% (as measured by the U.S. Standard & Poor's 500 Index). If you do that, the odds are strong that you'll trip and fall - right off the platform and onto the tracks.
I think it's far better to buy your ticket, and then calmly walk for the train that you know is waiting (which closely relates to No. 3 above).
Remember, all investments contain risk. But by following the five simple rules I've just outlined you can go a long way to ensuring a healthier, more profitable portfolio that's capable of generating market-beating returns.No More Storage in Cushing: WTI Will Be $90 in a Month
The latest inventory report came out on Wednesday, March 30 from the U.S. EIA (Energy Information Administration) showing Cushing stocks at a record 41.9 million barrels (Fig. 1). And guess what? The news is only going to get worse for WTI longs, as the next couple of weeks will bring the total storage at Cushing close to the max capacity of 44 million barrels due to the fact that more traders took delivery on WTI (West Texas Intermediate) on the last CL rollover.
MENA Does Not Matter Much
There is a three week span after the expiration where actual physical delivery takes place, so expect the next two EIA reports to test whatever remaining spare capacity exists at Cushing. In other words, it doesn`t really matter what is occurring in the MENA (Middle East and North Africa), since over the next month at the next rollover, traders will have to sell any long positions because they cannot take delivery even if they want to.
Abnormal Crude Deliveries
Furthermore, because of the events transpiring in the MENA over the last couple of months, traders who normally don`t take delivery have taken delivery over the last two rollovers, due to ‘what if” scenarios where Saudi Arabia became a legitimate concern, and oil spiked to $130 a barrel. The fallout from this is that traders and investors who normally take delivery will not be able to during this next rollover, as there will literally be no more storage at Cushing.
New Sellers Abound
This is very bearish for WTI prices over the next month, as now you are going to have an entirely new segment of sellers come rollover time. As such, expect the U.S. WTI prices to overshoot to the $90 a barrel range as shorts pile in before recovering a little around $93 a barrel at rollover (give or take a couple of bucks in either direction).
It is just not Cushing, the total U.S. supplies rose for the 10th time in 11 weeks, up another 2.9 million barrels for the March 25 week to 355.7 million (Fig.2). Remember during the summer when oil prices were in the low $70s? Well, inventories were at the height around 368 million barrels, which became a big headwind for long only speculators in crude oil at the time.
Demand Destruction by High Oil Prices?
So, here we are--only 12 million barrels from that exceedingly bearish level of US storage. And with these high prices we are starting to experience legitimate demand destruction. It seems with these high prices it is only a matter of time before we are again at the 368 million barrels of oil in US storage facilities at the Commercial level. So the Oil Bulls can no longer point to Cushing as an anomaly, we are literally swimming in Crude Oil right now in the US.
What’s Up with Rising Imports?
The news gets even more bearish for the Brent crowd as the following question should be asked regarding rising imports which are at their highest level in two months, at 9.1 million barrels per day--If there is such a tight supply in crude oil internationally, i.e., reflected in a much higher Brent premium to WTI, then why are imports rising when the US already has sufficient supply right now?
The reason is that there is no other place for this oil to go, especially with Japan`s massive cutback due to a natural disaster which has severely hampered much of its manufacturing, supply chain infrastructure, and domestic demand. All of this portends for continued higher import numbers for the next couple of months until Japan starts ramping back up to normal Oil demand statistics.
Logic Says …..
Unfortunately, Brent doesn`t actually have easily discernible inventory numbers, but through logical deduction one can surmise that if supply were really as tight as the price suggests, then imports to the US market would actually be significantly down, and not up. So expect Brent to come in as well over the next month. (Maybe in the range of $105 to $107 a barrel).
High Prices Kill Demand
With regard to the product side, gasoline inventories fell 2.7 million barrels to 217.0 million (Fig. 2) for the sixth straight weekly draw as there was a period at the beginning of the year, where we had a succession of inventory builds in gasoline products. The draw reflects decreasing refinery output, at 8.7 million barrels per day for the lowest rate in almost three months.
Refineries are cutting output as gasoline demand weakens in direct correlation over the last month due to higher prices at the pump, down 0.1% for the first negative year on year reading since the beginning of February.
This is a prime example of economics with regards to higher prices affecting consumer`s driving behavior, enough to lower demand for the product in the market. There is a slight lag between the RBOB futures price and the price paid at the pump, so expect demand to even go down further as gasoline prices fully manifest the appreciation in the futures market.
Down Goes The Pump Price
There is some good news for consumers in all of this as oil prices correct down over the next month; prices at the pump will start to go down as well. It is really the only way to get the consumer demand numbers back up and positive year on year, which is necessary to work off these large inventory numbers in crude oil storage.
Correct Now or Collapse Later
The consumer and the US economy needs lower prices to grow at a significantly higher rate in order to make a dent in an overall saturated oil market. The longer prices stay artificially high, and not reflect true demand in the market, given the current oversupply situation, the correction, when it does occur, will be even sharper (For example the 2008 Oil collapse).
The old adage “you can pay now, or pay later” applies to the crude oil market here. You can ignore fundamentals for only so long, in the short term, supplies don`t really matter to traders, but there comes a time when fundamentals in the market supersede political and technical based analysis.
In the end, fundamentals have the ultimate and final say regarding price direction in the market. And over the next month, fundamentals will dictate that Crude Oil prices correct to a lower level from current levels.
This correction would actually be healthy for the oil market, if this fails to materialize, and oil prices stay high with continuing oversupply, and weak demand, i.e., an artificial mismatch between supply, demand, and price, expect an even “healthier” and fundamentally more severe correction when market equilibrium reasserts itself.
Supply & Storage Fundamental Matters
Now that I have your attention...., no one can predict where oil prices will actually go as the crude oil market is a complex equation with ever changing variables. However, the purpose of the article is to discuss the developing supply and storage capacity dynamics in the market place.
Some other factors which might help facilitate crude oil`s decline would be the stepping down of Libyan leader Muammar Qaddafi, an early ending to QE2, a strengthening US Dollar, and some profit taking in some of the commodity related funds that include Gold, Silver, and Oil.
As recent fund inflows have helped prop up WTI beyond purely concerns over the unrest in the MENA region, the exact oil price will depend upon some of these other factors. Nevertheless, it seems reasonable to assume that one factor is quantifiable, and that is the supply issues with regard to storage capacity in the US market. Given these dynamics, WTI should close lower than when it started as the front month contract, and that hasn`t happened in a while, with prices being somewhere in the $90s.
MENA Does Not Matter Much
There is a three week span after the expiration where actual physical delivery takes place, so expect the next two EIA reports to test whatever remaining spare capacity exists at Cushing. In other words, it doesn`t really matter what is occurring in the MENA (Middle East and North Africa), since over the next month at the next rollover, traders will have to sell any long positions because they cannot take delivery even if they want to.
Abnormal Crude Deliveries
Furthermore, because of the events transpiring in the MENA over the last couple of months, traders who normally don`t take delivery have taken delivery over the last two rollovers, due to ‘what if” scenarios where Saudi Arabia became a legitimate concern, and oil spiked to $130 a barrel. The fallout from this is that traders and investors who normally take delivery will not be able to during this next rollover, as there will literally be no more storage at Cushing.
New Sellers Abound
This is very bearish for WTI prices over the next month, as now you are going to have an entirely new segment of sellers come rollover time. As such, expect the U.S. WTI prices to overshoot to the $90 a barrel range as shorts pile in before recovering a little around $93 a barrel at rollover (give or take a couple of bucks in either direction).
It is just not Cushing, the total U.S. supplies rose for the 10th time in 11 weeks, up another 2.9 million barrels for the March 25 week to 355.7 million (Fig.2). Remember during the summer when oil prices were in the low $70s? Well, inventories were at the height around 368 million barrels, which became a big headwind for long only speculators in crude oil at the time.
Demand Destruction by High Oil Prices?
So, here we are--only 12 million barrels from that exceedingly bearish level of US storage. And with these high prices we are starting to experience legitimate demand destruction. It seems with these high prices it is only a matter of time before we are again at the 368 million barrels of oil in US storage facilities at the Commercial level. So the Oil Bulls can no longer point to Cushing as an anomaly, we are literally swimming in Crude Oil right now in the US.
What’s Up with Rising Imports?
The news gets even more bearish for the Brent crowd as the following question should be asked regarding rising imports which are at their highest level in two months, at 9.1 million barrels per day--If there is such a tight supply in crude oil internationally, i.e., reflected in a much higher Brent premium to WTI, then why are imports rising when the US already has sufficient supply right now?
The reason is that there is no other place for this oil to go, especially with Japan`s massive cutback due to a natural disaster which has severely hampered much of its manufacturing, supply chain infrastructure, and domestic demand. All of this portends for continued higher import numbers for the next couple of months until Japan starts ramping back up to normal Oil demand statistics.
Logic Says …..
Unfortunately, Brent doesn`t actually have easily discernible inventory numbers, but through logical deduction one can surmise that if supply were really as tight as the price suggests, then imports to the US market would actually be significantly down, and not up. So expect Brent to come in as well over the next month. (Maybe in the range of $105 to $107 a barrel).
High Prices Kill Demand
With regard to the product side, gasoline inventories fell 2.7 million barrels to 217.0 million (Fig. 2) for the sixth straight weekly draw as there was a period at the beginning of the year, where we had a succession of inventory builds in gasoline products. The draw reflects decreasing refinery output, at 8.7 million barrels per day for the lowest rate in almost three months.
Refineries are cutting output as gasoline demand weakens in direct correlation over the last month due to higher prices at the pump, down 0.1% for the first negative year on year reading since the beginning of February.
This is a prime example of economics with regards to higher prices affecting consumer`s driving behavior, enough to lower demand for the product in the market. There is a slight lag between the RBOB futures price and the price paid at the pump, so expect demand to even go down further as gasoline prices fully manifest the appreciation in the futures market.
Down Goes The Pump Price
There is some good news for consumers in all of this as oil prices correct down over the next month; prices at the pump will start to go down as well. It is really the only way to get the consumer demand numbers back up and positive year on year, which is necessary to work off these large inventory numbers in crude oil storage.
Correct Now or Collapse Later
The consumer and the US economy needs lower prices to grow at a significantly higher rate in order to make a dent in an overall saturated oil market. The longer prices stay artificially high, and not reflect true demand in the market, given the current oversupply situation, the correction, when it does occur, will be even sharper (For example the 2008 Oil collapse).
The old adage “you can pay now, or pay later” applies to the crude oil market here. You can ignore fundamentals for only so long, in the short term, supplies don`t really matter to traders, but there comes a time when fundamentals in the market supersede political and technical based analysis.
In the end, fundamentals have the ultimate and final say regarding price direction in the market. And over the next month, fundamentals will dictate that Crude Oil prices correct to a lower level from current levels.
This correction would actually be healthy for the oil market, if this fails to materialize, and oil prices stay high with continuing oversupply, and weak demand, i.e., an artificial mismatch between supply, demand, and price, expect an even “healthier” and fundamentally more severe correction when market equilibrium reasserts itself.
Supply & Storage Fundamental Matters
Now that I have your attention...., no one can predict where oil prices will actually go as the crude oil market is a complex equation with ever changing variables. However, the purpose of the article is to discuss the developing supply and storage capacity dynamics in the market place.
Some other factors which might help facilitate crude oil`s decline would be the stepping down of Libyan leader Muammar Qaddafi, an early ending to QE2, a strengthening US Dollar, and some profit taking in some of the commodity related funds that include Gold, Silver, and Oil.
As recent fund inflows have helped prop up WTI beyond purely concerns over the unrest in the MENA region, the exact oil price will depend upon some of these other factors. Nevertheless, it seems reasonable to assume that one factor is quantifiable, and that is the supply issues with regard to storage capacity in the US market. Given these dynamics, WTI should close lower than when it started as the front month contract, and that hasn`t happened in a while, with prices being somewhere in the $90s.
10 Financial Lessons for a Richer Life
Jeffrey Strain
Let's face it, personal finance isn't nuclear physics.
The basics are so simple that anyone can get the concepts down in less than a day -- spend less than you earn, save and invest the rest.
Knowing what should be done and actually doing it, however, are two different things.
Most people realize that spending more money than they have is a bad, bad thing. That still doesn't keep millions of people from racking up credit-card debt.
Here are 10 money lessons I wish I had known when I was 20 (I'm now 42 years old), which also have the power to change your life if you are able to embrace them.
10. Money Doesn't Buy Happiness
I knew this in my heart when I was younger. After all, who can't hum the tune of the Beatles song Can't Buy Me Love?
But my head often countered it in real life. It took me several years of working in a large corporation making good money, but not enjoying my job, to finally get it through my head that money in itself does not make you happy, and the accumulation of money will do very little for your happiness unless you know how to use that money once you have it.
The happiness comes from the opportunities money makes available so that you can do the things that you want to do. If you have no idea what these things are, no amount of money will make you happy.
9. Goals Are the Key
I didn't begin to make specific financial goals until my early 30s, and it kills me that I lost 10 years in this department.
The old saying that if you don't know where you're going, it's difficult to get there is never more true with your financial goals. It wasn't until I took the time to write down my financial goals in detail that I began to find financial success.
Financial goals give you something to strive for and give you clear knowledge on how you want to spend the money that you earn. They also greatly help you avoid impulse purchases and spending money on things that aren't important.
8. Impulse Purchases Dash Dreams
I spent more money on more crap coming out of college than I would ever care to admit.
Impulse spending (or spending money on anything that isn't important to you and your goals) is the worst type of spending that you can do, yet this is how most people spend their money when they don't have financial goals.
It's especially destructive if it also leads to credit-card debt. Impulse purchases come about when you aren't really sure what you want in your life or what will make you happy.
This is why advertising is so effective. Advertisements make you believe that buying a product or service will give you the happiness that you are seeking, when this is rarely the case.
If you can learn to be patient with your money and avoid impulse purchases by knowing what your financial goals are, you will have made major strides in getting your finances in order.
7. Buy Memories, Not Things
A big con our society plays on us is that stuff will make us happy.
I fell for it for far too long.
When it comes to spending the money that you do have, buying experiences and memories with those whom you care about is a much better use of your money than purchasing material things. It's not the house that you buy, but the home that you make with your family inside it that matters.
When you look back on your life, you will remember the times, memories and experiences far above the things that you have purchased.
Understanding this will ensure that you get much more value out of the money you spend.
6. TV Is a Dream Killer
I once believed that I didn't have the time to do all I wanted to do, but it was nothing more than having poor priorities in how I spent my time, watching TV being one of those poor choices.
I hear time and again that people simply don't have the time to achieve the goals that they have. If you are the average person, that time you don't have is being spent in front of your TV. If you want to achieve your goals and dreams, the first thing to do is start to wean yourself off your TV.
You can't imagine the amount of extra time that you have and all the extra things that you can accomplish when you take the time spent in front of the TV (or computer or whatever other form of procrastination you use) to work on the financial and other goals that you have.
5. Money Seduces
It's a fact of life. At some point you will likely be offered employment that pays you more than what your dream job will pay, or a good salary when you aren't yet sure what your dream job is.
You will likely justify taking the job because the extra money will outweigh the compromise of putting off what you want to do and you may assume it will even help you to pursue your dream job in your spare time since it will mean you have more money.
This is a false justification that will only serve to make you lose sight of your true goals in life. Be very careful of the seduction of a higher-paying job, because when you accept it, it will be difficult to leave.
I wish I had seen this seduction for what it was right out of college rather than four years into a career that wasn't what I wanted to be doing.
4. Financial Mistakes Aren't All Bad
I've made more than my fair share of financial mistakes, and you're going to make financial mistakes, too. Everybody does and they can actually be a great benefit for you in the long run.
The key is learning from them instead of repeating them over and over again. Instead of getting down on yourself when you make a mistake, take the time to learn from it and make sure that it never happens again.
If you learn from your mistakes, you will come out far ahead than if you'd never make any mistakes at all over never learn from them.
3. Do What You Love and the Money Follows
The money probably won't be there at first, and it might seem impossible for you to figure out a way to make money from it, but if you are truly passionate about it, there is a way to succeed and make a living doing what you love. It takes a lot of time, effort and persistence, and it won't be easy.
You will likely have to become quite creative to make it happen, but if you truly love what you're doing, that effort will be the reason you are willing to put in the extra hours it takes to succeed.
I wish I would have started looking for my dream job a lot sooner and that I had the confidence to do so right out of college.
2. Money Is Emotional
You know yourself better than anyone else, and what motivates you. What motivates me and what motivates you may not be the same.
Take this knowledge and use it to your advantage. While personal-finance books will tell you the best way to handle your finances from an unemotional perspective, this advice is worthless if it doesn't work with your personality.
Adopt the methods that will help you get to your financial goals the quickest, leveraging your personal habits to do so.
Doing something (even if it is a longer process) is almost always better than the choice of doing nothing because the method advanced doesn't work well for your personality.
1. Embrace Compound Interest
If you want to be wealthy, understand compound interest and how it is your best financial friend from an early age. To retire early you don't need to make a lot of money.
All you need to do is begin saving small amounts early. The earlier you begin to put money into retirement savings, the more you'll have, and the sooner you will be able to retire.
Most people think that it is a matter of working hard and making a lot, but the true path to wealth is simply to start saving and investing from an early age.
Let's face it, personal finance isn't nuclear physics.
The basics are so simple that anyone can get the concepts down in less than a day -- spend less than you earn, save and invest the rest.
Knowing what should be done and actually doing it, however, are two different things.
Most people realize that spending more money than they have is a bad, bad thing. That still doesn't keep millions of people from racking up credit-card debt.
Here are 10 money lessons I wish I had known when I was 20 (I'm now 42 years old), which also have the power to change your life if you are able to embrace them.
10. Money Doesn't Buy Happiness
I knew this in my heart when I was younger. After all, who can't hum the tune of the Beatles song Can't Buy Me Love?
But my head often countered it in real life. It took me several years of working in a large corporation making good money, but not enjoying my job, to finally get it through my head that money in itself does not make you happy, and the accumulation of money will do very little for your happiness unless you know how to use that money once you have it.
The happiness comes from the opportunities money makes available so that you can do the things that you want to do. If you have no idea what these things are, no amount of money will make you happy.
9. Goals Are the Key
I didn't begin to make specific financial goals until my early 30s, and it kills me that I lost 10 years in this department.
The old saying that if you don't know where you're going, it's difficult to get there is never more true with your financial goals. It wasn't until I took the time to write down my financial goals in detail that I began to find financial success.
Financial goals give you something to strive for and give you clear knowledge on how you want to spend the money that you earn. They also greatly help you avoid impulse purchases and spending money on things that aren't important.
8. Impulse Purchases Dash Dreams
I spent more money on more crap coming out of college than I would ever care to admit.
Impulse spending (or spending money on anything that isn't important to you and your goals) is the worst type of spending that you can do, yet this is how most people spend their money when they don't have financial goals.
It's especially destructive if it also leads to credit-card debt. Impulse purchases come about when you aren't really sure what you want in your life or what will make you happy.
This is why advertising is so effective. Advertisements make you believe that buying a product or service will give you the happiness that you are seeking, when this is rarely the case.
If you can learn to be patient with your money and avoid impulse purchases by knowing what your financial goals are, you will have made major strides in getting your finances in order.
7. Buy Memories, Not Things
A big con our society plays on us is that stuff will make us happy.
I fell for it for far too long.
When it comes to spending the money that you do have, buying experiences and memories with those whom you care about is a much better use of your money than purchasing material things. It's not the house that you buy, but the home that you make with your family inside it that matters.
When you look back on your life, you will remember the times, memories and experiences far above the things that you have purchased.
Understanding this will ensure that you get much more value out of the money you spend.
6. TV Is a Dream Killer
I once believed that I didn't have the time to do all I wanted to do, but it was nothing more than having poor priorities in how I spent my time, watching TV being one of those poor choices.
I hear time and again that people simply don't have the time to achieve the goals that they have. If you are the average person, that time you don't have is being spent in front of your TV. If you want to achieve your goals and dreams, the first thing to do is start to wean yourself off your TV.
You can't imagine the amount of extra time that you have and all the extra things that you can accomplish when you take the time spent in front of the TV (or computer or whatever other form of procrastination you use) to work on the financial and other goals that you have.
5. Money Seduces
It's a fact of life. At some point you will likely be offered employment that pays you more than what your dream job will pay, or a good salary when you aren't yet sure what your dream job is.
You will likely justify taking the job because the extra money will outweigh the compromise of putting off what you want to do and you may assume it will even help you to pursue your dream job in your spare time since it will mean you have more money.
This is a false justification that will only serve to make you lose sight of your true goals in life. Be very careful of the seduction of a higher-paying job, because when you accept it, it will be difficult to leave.
I wish I had seen this seduction for what it was right out of college rather than four years into a career that wasn't what I wanted to be doing.
4. Financial Mistakes Aren't All Bad
I've made more than my fair share of financial mistakes, and you're going to make financial mistakes, too. Everybody does and they can actually be a great benefit for you in the long run.
The key is learning from them instead of repeating them over and over again. Instead of getting down on yourself when you make a mistake, take the time to learn from it and make sure that it never happens again.
If you learn from your mistakes, you will come out far ahead than if you'd never make any mistakes at all over never learn from them.
3. Do What You Love and the Money Follows
The money probably won't be there at first, and it might seem impossible for you to figure out a way to make money from it, but if you are truly passionate about it, there is a way to succeed and make a living doing what you love. It takes a lot of time, effort and persistence, and it won't be easy.
You will likely have to become quite creative to make it happen, but if you truly love what you're doing, that effort will be the reason you are willing to put in the extra hours it takes to succeed.
I wish I would have started looking for my dream job a lot sooner and that I had the confidence to do so right out of college.
2. Money Is Emotional
You know yourself better than anyone else, and what motivates you. What motivates me and what motivates you may not be the same.
Take this knowledge and use it to your advantage. While personal-finance books will tell you the best way to handle your finances from an unemotional perspective, this advice is worthless if it doesn't work with your personality.
Adopt the methods that will help you get to your financial goals the quickest, leveraging your personal habits to do so.
Doing something (even if it is a longer process) is almost always better than the choice of doing nothing because the method advanced doesn't work well for your personality.
1. Embrace Compound Interest
If you want to be wealthy, understand compound interest and how it is your best financial friend from an early age. To retire early you don't need to make a lot of money.
All you need to do is begin saving small amounts early. The earlier you begin to put money into retirement savings, the more you'll have, and the sooner you will be able to retire.
Most people think that it is a matter of working hard and making a lot, but the true path to wealth is simply to start saving and investing from an early age.
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