Last Time Out
QE purchases finale in Oct 2014, were telegraphed in a Jul FOMC mins release, that precipitated a 75% fall in oil prices. This was a final time a genocide cranky (50 dma channel subsequent 200dma) was seen in Brent or WTI Oil, until final week that is, when it’s utterance was listened again. – Fed Devil In The Details?
Coffee, Tea or Me?
Coffee, Tea or Me? is a book of purported memoirs by a fictitious stewardesses Trudy Baker and Rachel Jones. The book depicts a anecdotal lives of dual strong immature stewardesses, and was creatively presented as factual.
Published to good pushing in 1967, this square of adult novella went on to turn a inhabitant and general best seller. Together with 3 sequels, Coffee, Tea or Me? sole some-more than 5M copies and was translated into a dozen languages.
Interesting codicil, this adult novella array was indeed created by a masculine American Airlines PR repute in NYC. One Donald Bain was desirous around a ghostwriting event with dual Eastern Airlines stewardesses whose reminisces of their escapes were a bit thin. Bain managed to abundantly fill in a blanks and let a stews take all a book debate and TV glory.
After his initial unknown success, a “Murder She Wrote” books were published with a “author” identified as a illusory impression “Jessica Fletcher“, played in a blending TV array by Angela Lansbury, “with Donald Bain“, who wrote them all by himself.
Proving that one thing can infrequently lead to another and sometimes, things aren’t utterly what they seem. Along those lines…
YTD WTI oil has plunged -22%, and given November, coffee futures are in a 38% nosedive. Are these and other signs indicating to something other than a Fed and MSM account of a strong economy with tame acceleration and minimal unemployment? Moving West…
Crude Mottled?
A wanton indication for oil, joke intended… Economy minus; Oil direct expansion equal or rebate vs. final year; /CL and /RB Inventory and vs. final year; Price minus; DUH. Jeffrey P. Snider points out similar proof here. Baring exogenic shock, oil is lacking upside procedure for prices until direct expansion roughly shrinks register growth.
Since Jan. 1st, wanton has traversed from $54 to $42 or 22% and is during a cost seen early final November. This was when OPEC and 10 other oil producing countries concluded to prolongation cuts to fight a flourishing supply bolt and pull a marketplace up.
Funny thing, OPEC usually met again to extend those prolongation cuts. Coincidence? Invoke Leroy Jethro Gibbs Rule 39. And final week’s ensuing declines in oil? What do we design when a Iranian oil apportion opens his mouth about prolongation cuts of 1.8Mbp, and says “reaching an settle to reduce a cuts would be difficult“.
Why would he contend that? Last week’s appointment of new Saudi Crown Prince Mohammed bin Salman, famous for his warlike domestic and mercantile policies opposite associate OPEC member Iran, placed a destiny of a supply slicing devise underneath augmenting uncertainty.
Dissension in a OPEC ranks, they should know better, as everybody knows this adage binds true.
Faux Inflation and EU Banks?
Little Iceland is promulgation a transparent contraction in GDP signal, while a UK acceleration is promulgation a large fake positive. The Nattering One was amused with a MSM spin put on final week’s UK inflation:
“The augmenting cost of mechanism games and package holidays helped pull adult acceleration to 2.9% final month“
Spinning disastrous news into a fake certain for strong capability and GDP earns a Goebbel’s MSM Spin award. All that “inflation” is given given Brexit ruminations behind in 2015, a argent has taken a POUNDING by a King (Dollar), joke intended. Along with a post line peep pile-up $25 miscarry in oil, this has lifted a cost of alien products to a emerald island, while salary are not gripping up, that we can bank on…
With a 1st and 2nd tier subordinated debt holders removing wiped out in Spain, this brings some-more regard for bailouts or details with Italian banks Banca Monte dei Paschi (OTCPK:BMDPY) (OTC:BMDPD), Veneto Banca (OTC:VENBF) and Popolare Vicenza. At a impulse we am essay this, Banca Intesa San Paolo has offering to buy a latter dual Venetian banks for 1 Euro, if they are nude of all NPLs and authorised risks… comic tragedy maturation for some?
First, Novo Banco in Portugal, afterwards Popular (OTCPK:BPESF) (OTCPK:BPESY) in Spain. Hope you’re not holding deposits or invested in Liberbank or Cajamar, as a wheels also came off their holds and stock. Pimco took a good strike in this Iberian shock in that seems to be a bit of a lid being put on by a US MSM, what’s a word? And many like some line and mercantile indicators during a moment, it ain’t this.
Ro-BUST Economy?
Adding to a new sell bloodbath (Payless Shoes going BK, when Americans can’t means inexpensive Chinese shoes, what can they afford?), discretionary, auto, GDP, CPI and IP. Aside from disappearing genuine domicile income and wages, Jeffrey P. Snider astutely and cogently observes GDP since…
Q1 2012 – 6 entertain avg. 1.20%
Q3 2013 – 5 entertain avg. 2.89%
Q4 2014 – 4 entertain avg. 2.21%
Q4 2015 – 6 entertain avg. 1.55%
With a “recovery” account clearly going in reverse, one step forward, dual stairs back, a new norm? The overextended US consumer whose credit life line has run out, is stability to daub out… Headline sell sales fell 0.3% in May vs. expectations for a tiny rise. It’s a weakest imitation given Jan of 2016. Sales ex-autos and gas were prosaic vs.+0.3% expected.
Martin (Macronomics) points out BofAML’s observe…. Since 1957 there have been 722 overlapping dual month periods. As core CPI prices roughly always go up, in usually SIX of these (722), or rebate than 1%, have we seen core CPI DEFLATION – but that now includes a many new March-April duration this year.
Much like a fat lady warming up, that hulk sucking sound entrance from a spiral is starting to hum. Q2 Atlanta GDPNow has come down from 4.3 to 3.0. Based on all a above, TNN will be inexhaustible and lift est. Q2 GDP from 1.0 to 1.75 that will substantially be a high for a year.
Where’s a demand? Industrial Production, that creates demand, is still brief of a 2008 pre-crisis level. Worse yet, a stream “recovery“, if one wants to call it that, stays brief of a 2002 liberation from a dot com implosion.
Now that’s what a Nattering One calls, Ro-BUST-a adequate mercantile movement to clear serve executive bank rate hikes and tightening. Proving a oxymoron, law in marketing?
Contango and Corrective Correlations?
Here is a climate change and low supply high direct siphon for final week. To no relief as /KC dumped out. Here’s why… Robusta in backwardation as continue in Vietnam is a concern. Arabica in contango.
Recent lows could have triggered stops and caused liquidation. Net shorts doubled in a final 3 weeks. Brazil is entering Winter, and cold snaps could repairs crops and means abounding Arabica reserve to diminish.
Despite imminent Brazilian Winter, not even Jessica Fletcher can envision or control a weather. Voila! Forecasts of DRY continue in Brazil, a world’s biggest coffee and sugarine grower, for during slightest a entrance week are approaching to concede farmers to speed adult their harvests. More supply? DOH!!!
Lets get technical… A pierce subsequent pivotal levels triggered draft formed prolonged liquidations during 1.18… The pierce pressured a arabica reward over robusta, on a delay chart, to 0.25c lb a smallest given 2008.
Traders forked to a $1.20/$1.25 Sep options put widespread that saw around 4,000 lots trade before to a pointy pierce lower, that presumably led to prolonged murder in futures as prices extended losses.
Above, given November, Jul coffee futures went from $182 to $113 in a 38% nosedive. Falling coffee prices are auspicious for coffee retailers (JO) like Starbucks (SBUX), Dunkin’ Brands (DNKN), McDonald’s (MCD), and Green Mountain Coffee (GMCR).
Speculative selling, opposite plenty tellurian supplies, have caused oil, sugar, coffee and cocoa markets to extend losses. Wonder why?
Algorithms and correlations. Coffee and oil dropped, sugarine is used to make ethanol for fuel, and with cocoa, chocolate, so all drops in unanimity viz. a flock movement genius partially enforced by algo bots.
Despite a Fed and MSM happy confusion mantra, a not so contented mercantile correlations are manifesting in commodities, and have been abundantly reflected in Eurodollar futures and a bond produce bend for utterly some time.
Silver lining? Chocolate and candy makers, along with coffee purveyors and refineries will have aloft profits. Cheaper candy, crater o’ Joe or gallon of petrol? Don’t count on it even if your rock candy.
The Death Cross?
And entrance full circle… First genocide cranky (50 dma crosses subsequent 200 dma) given late Aug in 2014… after those fatal FOMC mins in early Jul 2014 that tangible Oct as when a punch play of QE would be taken away.
As previously Nattered, this June’s FOMC minutia indicated who, what, where and how a stream punch play of Fed hurl overs and additional pot (balance square reduction) would be gradually taken away, though this Naybob beheld something missing, temporal proximity.
In 2014, $15B monthly came off a table, this time a MONTHLY ante is Q1 $10B, Q2 $20B, Q3 $30B, Q4 $40B, and Q5 $50B. Again, we think a final square of vicious information is entrance Jul 5th in the recover of a FOMC minutes. viz. temporal vicinity as in WHEN.
The players already know what they are going to do, they usually don’t know WHEN, on that they will put their brazen skeleton into action. For a probable future, one competence compensate mind to a draft of oil from Jul 5th, 2014 on.
In closing, with a YTD opening in commodities, a pretension above competence come to mind. Our efforts are not dictated to resemble, so greatfully don’t fire a messenger. Let’s be clever out there folks and sidestep baby hedge.
Happy Trails?
Hope we folks enjoyed yourselves, locate we after on down a trail. Would like to appreciate we folks fer pleasantly droppin’ in. You’re all invited behind again to this locality. To have a heapin’ helpin’ of Nattering hospitality. Naybob that is. Set a spell, take your boots off. Y’all come behind now, y’hear!
This is a 122nd in a array of thematically associated missives that will try to brand a macroeconomic army with intensity to adversely outcome capital, commodity, equity, bond and item markets.
I wish to dedicate this missive to one of my mentors, Salmo Trutta, who is a inclusive commenter on SA. Without Salmo’s tutelage, and insistence on not masticating and spoon-feeding a baby ducks, as in training a tough approach by doing a leg work and earning it, this missive would not have been possible. To we “Proximo”… “win a throng and win your freedom” – Spaniard.
Disclaimer
Investing is an inherently unsure activity, and investors contingency always be prepared to potentially remove some or all of an investment’s value. Past opening is, of course, no pledge of destiny results.
Before investing, investors should cruise delicately a investment objectives, risks, charges and losses of an investment vehicle. This and other critical information is contained in a handbill and outline prospectus, that can be performed from a principal or a financial adviser. Prospective investors should review a handbill delicately before investing.
Market Plays?
As for how all of a above ties into a intensity and prejudiced list of marketplace plays below… a marketplace as a whole could be influenced, and this could tie into any list of investments or assets. Those listed subsequent occur to change a indices some-more than most.
There are many macroeconomic cranky zone and marketplace item correlations concerned that impact your investments. Economic conditions, a eurodollar, tellurian dollar debt and financial process all change a gratefulness of a above and marketplace plays below, around King Dollar’s value, credit spreads, barter widespread pricing, marketplace making, liquidity, financial supply and velocity, usually to name a few. For a finish missive array inventory covering those theme and more, click here.
The intensity tellurian mercantile developments discussed in this missive could impact countless collateral and item markets, sectors, indexes, commodities, forex, bonds, mutual funds, ETFs and stocks.
A List of Potential Market Plays (Long or Short?):
Apple Computer (NASDAQ:AAPL); Google (NASDAQ:GOOG); Facebook (NASDAQ:FB); Microsoft (NASDAQ:MSFT); Citigroup (NYSE:C); General Electric (NYSE:GE); Cisco (NASDAQ:CSCO); Bank of America (NYSE:BAC); Amazon (NASDAQ:AMZN); Tesla (NASDAQ:TSLA); SP 500 Trust ETF (NYSEARCA:SPY) ; Ford (NYSE:F); Starbucks (NASDAQ:SBUX); Intel (NASDAQ:INTC); ATT (NYSE:T); IBM (NYSE:IBM); Exxon Mobil (NYSE:XOM);
Disclosure: I/we have no positions in any bonds mentioned, and no skeleton to trigger any positions within a subsequent 72 hours.
I wrote this essay myself, and it expresses my possess opinions. we am not receiving remuneration for it (other than from Seeking Alpha). we have no business attribute with any association whose batch is mentioned in this article.