Posts Tagged ‘supply and demand’

Red Flags for the Economy

Red Flags for the Economy

By MIKE WHITNEY writing at CounterPunch

Bonds are signaling that the recovery is in trouble. The yield on the 10-year Treasury (2.97 percent) has fallen to levels not seen since the peak of the crisis while the yield on the two-year note has dropped to historic lows. This is a sign of extreme pessimism. Investors are scared and moving into liquid assets. Their confidence has begun to wane. Economist John Maynard Keynes examined the issue of confidence in his masterpiece "The General Theory of Employment, Interest and Money". He says:

"The state of long-term expectation, upon which our decisions are based, does not solely depend, therefore, on the most probable forecast we can make. It also depends on the confidence with which we make this forecast — on how highly we rate the likelihood of our best forecast turning out quite wrong….The state of confidence, as they term it, is a matter to which practical men always pay the closest and most anxious attention."

Volatility, high unemployment, and a collapsing housing market are eroding investor confidence and adding to the gloominess. Economists who make their projections on the data alone, should revisit Keynes. Confidence matters. Businesses and households have started to hoard and the cycle of deleveraging is still in its early stages. Obama’s fiscal stimulus will run out just months after the Fed has ended its bond purchasing program. That’s bound to shrink the money supply and lead to tighter credit. Soon, wages will contract and the CPI will turn from disinflation to outright deflation. Aggregate demand will weaken as households and consumers are forced to increase personal savings. Here’s how Paul Krugman sums it up:

"We are now, I fear, in the early stages of a third depression….And this third depression will be primarily a failure of policy. Around the world … governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. … After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

"I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between


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SUPPLY CRUNCH RECEDES

Here’s a couple articles on the demand for oil.  The first is by JD at Peak Oil Debunked.

SUPPLY CRUNCH RECEDES 

Fawley_Oil_RefineryFor the last few months the peak oilers have been terrorizing the newbies with the "looming supply crunch" due to lack of investment. Much of this was based on comments earlier this year by the IEA:

"Currently the demand is very low due to the very bad economic situation," [Nobuo Tanaka, the IEA's executive director] said. "But when the economy starts growing and recovery comes again in 2010 and onward, we may have another serious supply crunch if capital investment is not coming."

However, this one has now bitten the bag like so many other peak oil scares over the years:

IEA sees global oil supply crunch risk recede
Jun 29 2009

The world may escape an oil supply crisis for the next five years because a slow recovery from the economic downturn would hold down growth of demand, the International Energy Agency (IEA) said on Monday.

Yet another case where the peak oilers relentlessly hype an anticipated threat, and provide no reporting at all when the threat evaporates.

And in related news, the IEA just cut 3 million barrels per day for demand for the next four years: So Much for Chinese Demand (hat tip to Eric J. Fox)

And next, here’s Eric’s article in full. 

So Much For Chinese Demand

Courtesy of Eric J. Fox, Stock Market Prognosticator

"The International Energy Agency cut its oil demand estimates for every year through 2013 by about 3 million barrels a day, it said in its Medium- Term Oil Market Report today. Consumption will average 86.76 million barrels a day in 2012, the first year it will rise above 2008’s level of 85.76 million barrels a day, according to the Paris-based agency."

Well so much for demand for Energy from China. This demand growth has always been hyped by Energy bulls, but as I and many others have stated previously, what really matters is demand growth from the the U.S. and other industrialized nations.

Here is how the math works:

Oil demand in 2009 for the OECD countries is 45.2 million barrels per day, down 2.3 million barrels per day from 2008.

China oil demand is 7.9 million barrels per day. Let’s assume that it grows


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WILL COMMODITIES KILL THE STOCK RALLY?

WILL COMMODITIES KILL THE STOCK RALLY?

WILL COMMODITIES KILL THE STOCK RALLY?

Courtesy of The Pragmatic Capitalist

Energy & materials stocks make up 25% of the S&P 500.  Without their participation it’s nearly impossible for a sustainable rally.  One of the key contributors to the “sell in May and go away” data is the seasonal trends in commodity related stocks.   Over the last 10 years materials and oil related stocks have averaged 17% gains from October to May.  That seasonal strength adds tremendously to the overall indices.  As I often mention here, much of this is attributable to the strong seasonal demand trends in the oil markets.  Oil demand tends to dip during the fall and early winter before spiking in February and continuing into the July 4th holiday when the summer driving season officially ends.  This trend has clearly continued again this year as oil and gasoline have rallied over 95% since the March bottom:

oilandgas

The strong seasonal trend says you should be selling commodities now, but this isn’t the only evidence that makes me cautious heading into late summer.  David Rosenberg, of Gluskin-Sheff notes some important drivers of the recent commodity rally:

With the U.S. still in recession, what has been fueling the commodity markets have been the revival signs in China, and here, the news has become mixed from a commodity standpoint. We learned that Chinese imports of refined copper hit a record high in May for the fourth month in a row; but domestic supplies were actually put to work in terms of consumption at a much slower rate. In fact, the FT estimates that Chinese copper usage actually fell 3.5% in May even as imports surged 6% MoM (and 25.8% from a year ago). The same holds true for aluminum where consumption fell 1% in May.

Without question, the largest contributor to the recent run-up in commodity prices was China’s stimulus plan.  The IEA data has been unquestionably mixed in recent months (including yesterday’s downgrade of world oil demand) and hasn’t warranted the incredible price moves.   It’s not a stretch to say that China, along with regular seasonal speculation have been the primary drivers of the commodity price climbs.   And we’re now getting signs from China that they have stopped the stockpiling and expect lower prices going forward.  The Sydney Morning Herald notes:

“We


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The Phantom Commodity Bull Market and the Consequences

For a free subscription to Phil’s Stock World, click here (it’s easy, no credit card required)

Excellent article by Ben, the Financial Ninja, explaining the relationships between commodity prices, particularly oil, the dollar, "green shoots" and China’s quest for acquiring hard assets. - Ilene

The Phantom Commodity Bull Market and the Consequences

FN: Everybody is talking about commodities and a "new commodity Bull market". The general consensus is that the "China growth story" is responsible for this. Well, yes and no. Chinese demand has indeed picked up, but not because of growth. They’re hoarding.

Macro Man explains the Chinese "growth" miracle in The China Syndrome:

"Drilling down beneath the surface, however, we see a picture that is much less unequivocally bullish for commodities. While overall imports have barely started to recover in value terms, many commodity imports have absolutely skyrockjeted in volume terms. And at the end of the day, the inputs to China’s industrial and investment complex are based on volume, not value.

Macro Man ran a study looking at the import volume of four different industrial commodities, comparing it with the trend of 2003 through mid-2008, a period in which Chinese growth averaged 11%. (Data for coal imports only begins in December 2004.) The results were remarkable."

(The charts over at Macro Man are mind boggling in their implications. You need to see them for the rest of this post to be in context.)

FN: There is something else to consider as well. PRICES. In a free market economy prices are a signal relied upon by both producers and consumers to adjust their behavior on the margin. This is how both supply and demand constantly adjust in a relentless search for equilibrium. When demand exceeds supply the price adjusts higher. The signal to producers is to increase production and to consumers to reduce consumption. Rising prices therefore NORMALLY signal an expanding economy… in other words GROWTH.

Currently, demand has continued to plummet or stagnate for commodities. However, prices have rallied, with oil hitting $71 a barrel. This price is actually incredibly high if taken in a broader historic context… and even more absurd during times of economic crisis.

The question is, if not demand, what then has driven a bid into commodities?

The economic crisis, while clearly global, has severely stressed the


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The PhilStockWorld com LIVE Weekly Webinar - 07-17-19

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here.

Major Topics:

00:02:11 Indexes Charts
00:02:59 Energy Charts
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00:18:48 Money Talk Portfolio
00:31:25 7 Steps to Consistently Making 30-40% Annual Returns
00:35:41 Top Trades
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Zero Hedge

This Is Where The Next Recession Will Start: An Epidemiological Study

By Nicholas Colas of DataTrek

(Published at ZeroHedge)

US recessions are like epidemics: they all begin somewhere, and the “tell” is state-level unemployment data. For example, the end of the 2000 dot com bubble hit Connecticut and Massachusetts first – two hubs for the financials services industry with lots of affluent investors to boot. The end of the 2000s housing boom predictably impacted Florida and Nevada before the rest of the country. This time around, the data shows the manufacturing-heavy states of Michigan, Ohio and Indiana are most at risk. No wonder “Dr. Fed” wants to inoculate the region with lower interest rates.

When medical professionals study epidemics, they look for the source of the ou...



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Digital Currencies

Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

Courtesy of ZeroHedge. View original post here.

Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

A sea of green...

Source: Coin360

Bitcoin surged back above $10,000...

Ethereum bounced off suppo...



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Kimble Charting Solutions

Silver ETF (SLV) Testing Dual Breakout Resistance

Courtesy of Chris Kimble.

Silver (NYSEARCA: SLV) has been in a bit of a slumber when compared to the price action for Gold (NYSEARCA: GLD).

Precious metals bulls hope that this about to change, as bullish action from Silver is necessary to confirm any bull market / move in metals.

Today’s chart takes a closer look at the Silver ETF (SLV) on a weekly basis. As you can see, Silver is up 5 percent this week alone.

This is good news for metals bulls. But this rally isn’t confirming a breakout just yet.

As you can see in the chart below, SLV has been trading between support (1) ...



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Insider Scoop

Analysts Weigh In On Netflix's Rocky Quarter

Courtesy of Benzinga.

Netflix, Inc. (NASDAQ: NFLX) reported second-quarter results highlighted by an uncharacteristic decline in U.S. subscribers while international subscriber adds missed expectations. Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

Mor...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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Some other great content in this free eBook includes:

 

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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