Where are we at the moment and where we are heading to?

Been a while since my last post, several reasons for this, at personal level I been having some serious health issues and at a more professional level been busy and studying the markets and finance as whole quite a bit lately.

The World economy is decelerating quite a bit and by the way this is the official number , which is well know in many cases not to be a the true picture on the "ground":

The chart represents the three big engines of the world economy, the US,China & Germany and all are in a declining rate of change, even after further stimulus efforts made by the 3 central bans, The fed, the PBOC and the ECB, so in my opinion the action taken for example by PBOC in cutting RRR and the rate on deposits / Loans for 1 year maturity has not been extreme enough to "provoke" consumers & business to increase internal demand, please see the link bellow, another big problem is facing is the fact that the world economies are decreasing their demand for Chinese products, being the export markets one of their biggest GDP contributor is causing a serious headache to Chinese policy makers, plus the fact that their plans to offset this loss of external demand, by increasing their internal demand is not working as fast as they wanted, all this becoming one the main issues for Chinese monetary and economic policy, this kind of problems in the Chinese economy will translate to less raw commodities demand, as for example oil and copper, therefore I am bearish in those commodities and commodities in general, even after the problems caused by the Iran embargo by the EU is already in at work, the problems with Nordic countries disputes between Governments and unions of oil workers, which led to same loss of output. The problems at present with high price in corn, soy beans which may lead to a spill over to other food commodities/products, I believe are temporary and the recent spike in prices will abate, and I could go on with examples.
Global central banks interest rates

Europe is in a recession, is getting worst, and all the structural problems we saw as a cause to the last year and beginning of this one, which caused severe losses in the financial markets, with the banks being right in the middle of the epicenter, all those problems are still there, have not been dealt with in structural way and will come to daunt us sooner than later,however this problems may be kicked down the road again, as soon the ECB comes up with the LTRO3, which will give a bit more time to banks to heal their impaired balance sheets, with some more relevance for the case of Spanish and Italian financial institutions, I also believe even with the latest 100B Euros lifeline for the Spanish banks from the EU, this will not be enough plus Italy will also going to need to rescued, gain sooner then many people may expect. 
I hope I am wrong, because if that will be the case, it will be because economies in the EU are doing much better, which will lead to the only solution for the "illness" of much of the southern Europe economies and the PIIGS, which summarizing is economic growth. However as I mention before at the moment I am bearish and prepared with some positions in place, in the form of options and some futures, to be exact I am short WTI @ 87.50, Short Gold @ $1615, Short the Euro @1.25 and short Eurostoxx 50 and will adjust accordingly and probably even increase my shorts!
That is for today, this is where I stand at the moment, I am bearish Europe and the the main world economies, but of course there is plenty of buying opportunities out there, in the many growing economies around the world!

Too much will look bad, too little will look dangerous, so what is the right amount?

LTRO day ,finally after a couple of months of speculation on the amounts that banks would take in the 2nd round of quantitative easing by the back door from the ECB, we finally know the exact amount...€530B which was better then some extreme estimation's that were predicting that banks would take close to a €1Trillion!

There are two points here which are important to take out from this latest take from the banks, firstly is the fact that the first feared stigma related to the banks taking money from this tenders and that would be a sign of weakness, is completely out of the window, actually it seem that the opposite is true, secondly the fact that banks encounter themselves in a bit of a paradox in terms of the amount they should bid for, this because too little would signal a lost opportunity in enhanced earnings,even if small, through the use of the funds in possible carry trades and of course the refinancing needs at a very cheap rate, but on the other hand, if they take too much, markets can see it a sign of weakness, so I believe this latest round was at the just right amounts, where markets will feel comfortable with +€1 Trillion injected by the ECB since December 2011 and the banks will have excess liquidity to put to work or through the Sarcozy trade, where they buy investment grade governments bonds as the case of Italy and Spain which still yield over 5% and make a profit in the spread, once they borrowed it at 1%, giving a helping hand to the European governments to fund their deficits at cheaper rates, plus the spill over probably will go to chase riskier assets, giving a lift and feel good to the markets.

Is it 2008 all over again!?!

I am writing and the Us markets yet to close are in a complete meltdown, this time not because of their own banks but because of the mess in Europe sovereign debt and the poor financial positions Europeans banks are in, due to the exposure on the debt they have to countries as the likes of the PIIGS countries!

Also not helping is the lack of coordinated actions by the major central banks around the world, which finally last week made a coordinated intervention because of the long due shortness of US $ and the lack of access from some Europeans banks had to fund their US $ needs, so they announced a new start of swap line between the major CB and the FED.

Yesterday also the FED spooked the markets, with their lacklustre operation "twist" , which in the end is just a maturity transformation exercise and didn't announced any mew stimulus measures, which the market, ahead of it self had priced in, so once it was confirmed nothing more new was coming from the FED, the only rational reaction would be to correct expectations...

At this precise moments the SPX is trading at the major support and the 50% fibo retracement from the 2009 lows at 1120 if we closed below this level I believe is a cascade down to the next support which is at 1050!

Are we in recession??!!

Are we in a recession already?
According to the latest data it seems or we are already or very close, at least in the US, and if the US economy is in recession and still being the biggest in terms of nominal $ in the world, probably the world economy will follow suit, even as the EM economies are forecast to keep growing at healthy levels, but not enough to off set the weak US and European economic present state.


Let's look at this great chart (courtesy of John Mauldin and street talk advisor's):

As we can see in this chart the US economy is already or very close to recession, and even this being a new formed index, not just the creator have a great street credentials but also the components they used are leading indicators and highly correlated to predicting correctly recessions/growth!

At the same time we have the serious problems in Europe, where not just governments are cutting spending, to balance their overstretched finances plus the banking system there is insolvent, at least mostly of it, therefore will create more pressure in the GDP growth because banks are cutting the amount of money loaned to the broad economy, as a result we saw for i.e last week a lower then forecast German GDP, which is not just the powerhouse of Europe but also is the backer of the ESFS fund created to support the weaker peripheral economies as the case of the PIGS.

The last week, after a start with a relief rally, saw in the end, big losses in all major indexes, not just for the lack of conviction by investor in this market but also because August is a weak month anyway as many traders/investors are in holidays.

In my opinion we still didn't saw a low in this market, as the bond markets are telling us, because it keep going lower in terms of yields, which is a sign that worst times are to come, when investors are willing to accept rela negatives yields to park their money, this is normally a good sign and more we are not seeing an inverted yield, which means recession on the way or already present, because of the QE programs created by the FED which artificially maintains short term  yields low.

Resuming WE ARE GOING LOWER!!

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What a day...what a week!!

After almost two years of silence in my adventures of blogging I am back and what a week to be back, worst in a blog where I talk about how to make money in the markets, economic issues and anything I feel is pertinent!

Yesterdays we saw a sell off only equal to the dark days of the crisis of 2008, where we saw the Dow jones index (Index of the 30 largest industrial US companies) plunging over 530 points...Ouchhh!

Why you may ask, well several reasons, but mainly is the debt problems in Europe, which started with the peripheral countries, the so called PIGS (Portugal, Ireland, Greece and Spain), but now the problems are spread to the 3rd and 4th biggest European economies, Italy and Spain!

To add to this already complex problem, now we add as well the problems with US economy, with the anecdotal fight over the debt ceiling raise, where the both main parties try to use this event to score points with their electorates and extended the debate to include deficit reduction; not that this issue was not over due, but the moment and the event the utilise to raise this debate just created more uncertainty to the markets and in the end deliver little results for the "bang" it created!?!

So, this weeks sell off was just a reflex of the investor sentiment that it is out there, coupled with the increasing evidence that the  world economy is slowing down faster than previously thought, and as result OIL for example felt to $85 handle, price level not seen for a few long months, and oil normally is a leading indicator of things to come!!

The oil trader

 

It seems my calls for oil to fall, or that was a suckers rally were right...finally it seems the fundamentals are just catching up.
The market is full of oil and the correspondent derivate products, so is not a surprise we are starting to see a major correction in the price of the barrel, I attribute the last rally to speculation by retail and some institutional investing, nevertheless if we don't see massive buying coming back through for example the way of ETF buying I believe we will see oil back to the low $50's...

Posted by theoiltrader at 03:27 0 comments

Monday, 29 June 2009

Oil shooting up...again!

It seems the bulls have the upper hand again, the reason this time being one more attack in one of shell pipeline in nigeria.
To me they are starting to running out of reasons to push the prices up, not just because demand still did not pick up, plus the fact of global trade, even is showing signs of stabilising, is still colapsed.
In my humble opinion the latest "green shoots" have been no more then a re-stocking of inventories which logically would manifest it self by a increase on demand for commodities , including oil. Now the problem is where is the demand for this new stock?
That is the next factor which will determine if we have legs for the next push up .

Posted by theoiltrader at 12:04 0 comments

Sunday, 12 April 2009

Dilemma!

I am finding my self in a big dilemma...should i try to change university or keep my self on the same university until the end of the course?
This doubts started surging after a meeting with my personal tutor, which by the way an excellent teacher and also my teacher, this because I "showed" some doubts related to the commitment of not just some of my fellow students but also of some of the teachers. I know it is not their fault I am a mature student, with some more knowledge in the area of financial markets and trading then my colleagues, but in terms of commitment maybe my experience and the fact of not wanting to waste more time are big contributors factors for my feeling of sometimes I am not learning what I think I should!
Put this together with the factor of my university is not on the top of the "stupid" tables, and bang! My doubts and fears all in enhanced level, in terms of the prospects I have as a graduate trying to go to jobs markets , which I hope will be a buoyant one by the time I graduate.
I do honestly believe it doesn't matter which university you came from, what it matters is the commitment of the student , which will be reflected on his final grades, but it seems the potential employers do not see it this way, the old cliche of where did you study is still very much alive, not that I put in question the quality of the teaching on those institutions will be many times betters, but that does not invalidate the good work other universities are doing, again the commitment of the student it can make up for the difference.
I also believe a university reputation is made by their fellow graduates, so, in principle a university can climb those "classification tables" and through the years improve there stats, but here is where the factor student commitment have more weight, and my problem and my "fears" reside actually there, because at the present moment in terms of colleagues commitment and knowledge or the thirst for it is very questionable, and makes all those doubts and fears I have been feeling become bigger, making me make the terrible question , should I look to another university to finish my course?
But please don't take my present university for all is bad, because it isn't , we actually have excellent research and study venues, excellent list of up to date resources like the library and computer labs, etc...but the doubts are still there!
What should I do? I realise this must be a very personal decision and that there is nobody out there with a magic answer...so we will see.

Posted by theoiltrader at 08:19 3 comments

Labels: best universities, education, university

Bear market rally?

There we are at a crossroads point. There is been a massive rally on the last four weeks, based on a view of potential "green shots" on the economy. I do honestly think is noting more than a massive bear rally, which by the way is healthy to happen, more all has been based in false hopes, I'll explain, when I say false hopes not that the numbers are lying, they are just being put in a contest where the expectation been too low so a stabilisation of the deterioration of the economy is seen as more positive than actually is, at least in my view, and once investors start again come back to earth and admit they actually were putting themselves ahead of the possible recovery, which is still far by the way, they will start selling again or at least taking profits!
I do believe is still didn't saw the lows for this bear market, because if you look to it in terms of valuations and compared the numbers to other recession, at least the ones as deep as we saw until now one this last recession we are still living, you soon realise the valuations at the moment are still to much high, to the point where we can say we saw a bottom, we still didn't saw pure capitulation even on the 6Th of march wasn't still capitulation.
We just need to look at volume, this rally has been based in low volume, characteristic of trap bear market rally !
I am looking maybe we still see a bit more advances , maybe to the 874 level on the s&p but if we get there the bears will come back on masses, giving us the potential for a massive sell off !

Posted by theoiltrader at 07:27 0 comments

Wednesday, 4 March 2009

just close my short

just close my short position on ES ...coming from the 870 level was not bad at all... I do believe we will have a small rally for the next day or two !!!

Posted by theoiltrader at 02:35 0 comments

Wednesday, 17 December 2008

The scene is set ...2.2 millions barrels cut with regards from OPEC and another 600.000 thoushand from the russians, now the games will start!!
Lets wait in see who actually manage to stick to the supposed cuts and who will cheat as soon as ... it's a waiting and numbers game !
Even like that the market went down after a bearish but not so bearish E.d report today , which showed a bigger then expected build in distillates and a good increase in stocks in olkaoma!!
I am bearish and will be until the foreseen future, or until see some compliance in the cuts or some good improvement in demand numbers!

Posted by theoiltrader at 13:04 0 comments

Friday, 12 December 2008

contango in oil markets still to continue if the economic situation at all levels not just in terms of credit freeze don't improve, enormous premiuns o the contango will be kept, and the big oil companies and the oil traders will keep making millions until they run out of space or the oil prices start climbing with a vengeance at front of the curve.

Posted by theoiltrader at 09:07 0 comments

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• ▼ 2009 (5)
  • ▼ July (1)
    • It seems finnally we are waking up ...
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    • Oil shooting up...again!
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    • Dilemma!
    • Bear market rally?
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    • just close my short

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    • The scene is set ...2.2 millions barrels cut with ...
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