Crude Testing Critical Support…Will Stocks Follow?

Posted on November 8, 2018 by macromon

The near WTI futures price is down 21 percent since peaking on October 3rd as traders front ran the Iranian oil sanctions, which went in to place this week.   Fearing spiking oil prices, the U.S. granted waivers to eight of Iran’s largest buyers of crude – China, India, South Korea, Japan, Italy, Greece, Taiwan, and Turkey.

KeyStone Cops Markets

Now fearing the world is amply supplied, traders are selling crude down and down.  The U.S. now produces more oil and than Saudi and Russia.

The United States has increased output to more than 11 million barrels a day, surpassing Saudi and Russian production. Saudi Arabia and Russia have also been increasing output to offset the drop in Iranian exports. – CNBC

Testing Key Levels

After bottoming at $42 on June 1, 2017, WTI’s 2-year uptrend has been violated and now testing critical Fibonacci retracement levels.   It has already sliced through the .382 at $63.48 and is now set to test the .500 at $59.39.  The next key level is the .618 at $55.29, which,  if broken, it significantly increases the risk of giving it all back.

Crude prices are a trending machine and usually need a significant fundamental change, such an OPEC cut,  to reverse the trend.   We urge caution.   Watch and wait mode, folks.

Crude_Oil

Crude Oil And The S&P

Not exactly a perfect correlation, but the chart illustrates both stocks and the oil price tend to move together.  Moreover,  such a large price divergence as seen over the past month is not sustained.   We suspect crude is sending a signal that stocks are going to, at best, struggle here or move lower.

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Crude Prices And U.S. Jobs

We have written quite a bit about the U.S. labor market over the past year.

The only sector, which has experienced outsized employment growth since January 2017 has been in mining with job growth over 17 percent since President Trump took office.  The rise in the oil price has generated demand for roughneck hiring in the oil patch.

The following chart illustrates how mining support service hiring tracks the oil price but with a lag, from anywhere between 2-8 months.   If past is prologue,  the downturn in prices won’t begin to be felt in the oil patch for another month or two.

Some big changes coming to the Global Macro Monitor, see here:

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Posted in Crude Oil, Equity, Uncategorized | Tagged , | 13 Comments

How Trade Helps Both Sides – PIE

Posted on November 7, 2018 by macromon

Interesting piece explaining comparative advantage.  Though it shows the gains,  those cake and pizza makers in each country get hurt.   We always propose taxing some of the gains from winners to help the losers.

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GMM’s Pre Post-Mortem On The Midterm

Posted on November 7, 2018 by macromon

Just a quick note on the midterms as we await for the full results.

The Lavender Wave (pink + blue) that we were expecting did materialize, though not as strong,  and swept the Republicans from the House.  Suburban and college-educated women came out big last night, and a record number of over 100 women were elected to Congress.

This will truly be the year of women flexing their political clout. – GMM

It looks the number of House seats lost will come in at around 37, which puts the 2018 midterm the third worst showing for a first-term post-war president, and worst for a Republican president.   It is 17 seats lower than what the presidential approval model predicted but certainly not an outlier.  See chart.

The pick-up of Senate seats by Republicans was historic,

It was the first time since the nation started directly electing senators in 1914 that a party has won control of the House without gaining seats in the Senate. – USA Today

 

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Midterm Results In A General Election

As soon as the full results are in, we plan to overlay the midterm results into a general election framework based on votes from each Congressional district.    That is we will aggregate this data state-by-state and calculate the electoral college.

We have no idea how the data will shake out.  Stay tuned.

Midterm_ResultsNote:  The variance of the data points seems to increase the lower the presidential approval rating.  Got it, only three data points,  but indicates heteroskedasticity. 

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Changes Coming To Global Macro Monitor

Posted on November 7, 2018 by macromon

The Global Macro Monitor (GMM) came into existence in 2010, motivated, mainly, as a way to discipline our trading.  There is nothing like writing and data crunching to create clear, concise thinking and original research to create a framework to view the markets.

After over 5,000 posts at GMM, we have already significantly cut back on our trading and will do even more after year-end.  Thus the opportunity cost of our writing and research, which we have shared with you over the past eight years increases dramatically.

We are reaching out to our readers to get a sense if there is a market for the Global Macro Monitor on a subscription basis.  We are thinking of a pricing point for a basic subscription in the zip code of around the cost of a daily cup of coffee:

Basic Subscription –          $50 per month

We are also considering a premium version, such as a more personalized research/consulting product.  If, say,  a large institutional investor needs specific sovereign analysis on an individual country, or some other market or financial asset, our years of professional experience across a wide swath of markets can help you.

All the products will include actionable trades and investments,  with specific entry, exit, and stop-loss prices.   We are first to admit we don’t get them all right, but believe our analysis is unique and contrarian,  that it is clear, concise, and usually parsimonious.

If you had traded on our recent Treasury market or Apple analysis, for example, you could have already paid for a lifetime subscription and even thrown in a Tesla.

The Gathering Storm In The Treasury Market 2.0

iPhone Inflation Drives Apple Earnings, Again

One of our readers commented on our comprehensive analysis (38 pages) of the Treasury market:

I read the first and second article and have to say that it was the best analysis I ever read on treasuries. Thank you for the macro view and well done.

The free ride is over, folks, and the Global Macro Monitor will become our hobby and is about to go dimmer.

We need a critical mass of potential subscribers before we can move forward.

Come back to us ASAP, if you are interested.

Please contact us at:  macromonitor33@gmail.com

This post will repeat twice per week over the next few months.

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Near collision between US and Chinese warships – SCMP

Posted on November 5, 2018 by macromon

Never-before-seen footage: A near collision between a Chinese and a US warship in the South China Sea.

Read more: https://www.scmp.com/week-asia/geopol…

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Germany’s “Sneaky Left Hook”

Posted on November 5, 2018 by macromon

Interesting feedback from a GMM reader about our recent post on the silent rise of Germany’s Green Party,  As Everyone Looks Right, Germany Is Swinging Left,

“That is interesting. This article alone makes my subscription worth it. Not a WORD of this in the press and Die Grüner is at 24%! That’s a sneaky left hook.” – GMM reader

We like it.  Keep those comments, letters, and emails coming.

 

Germany's Left Hook_2

Check out how the Alternative for Germany (AfD) peaked this summer and have moved back to 13 percent support, while the Greens have doubled their support since the beginning of the year.

 

Germany's Left Hook

We don’t know if this would translate into more Green seats in the Bundestag if federal elections were held today,  as we are not German political analysts.  Nevertheless, it is certainly interesting and worth keeping on your radar.

U.S. Midterms

How you been listening to the American political pundits recently?   We have never seen so many waffles since our last visit to the IHOP.

Even Nate Silver at 538, who has the Dems at an 87 percent probability of taking the House back is hedging.   We’ll take a trade with an 87 percent probability any day, anytime. Of course, nothing is ever certain.

Fat tails?  Yes.

Life is a game of odds.

No doubt the pundits are still shell-shocked from the 2016 election, and the Disrupter in Chief has fattened the tails; that is he is a non-normal president, which may translate into a non-normal distribution, but come on, man!

Lavender Wave

We stand by our prediction of a Lavender Wave.

After looking at the rise of the Greens in Germany, coupled with the surprises that took place in the Democratic primaries, particular the race for the Georgia and Florida governorships, we are beginning to wonder if the U.S. body politic will cold-cock the pundits, once again.   This time with a “sneaky left hook” tomorrow.

If Beto, Andrew Gillum, and Stacey Abrams all win tomorrow, a distinct possibility,  begin the KO count.

Please don’t say we didn’t warn you back in February.

Posted in Politics, President Trump, Uncategorized | Tagged , , | 5 Comments

How voters in Germany turned against Angela Merkel – FT

Posted on November 5, 2018 by macromon
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It Could Never Happen Here…But It Is

Posted on November 4, 2018 by macromon

Fareed nails it this morning.   Wake up, AmeriKA!

If the country doesn’t repudiate this on Tuesday, the country and the world goes much darker and is in deep, deep doo-doo.

Soros is the perfect bogeyman for conspiracy theorists. He is rich, powerful, grew up abroad, and has a foreign accent.  Plus, he is Jewish.  Many Republicans now speak openly and often of the dangers of globalists, but for some reason, these globalists all tend to be Jewish financiers:  Llyod Blankfein, Janet Yellen, George Soros,  Gary Cohn. 

Given the ugly historical smears in this regard, one can only conclude that elements of the Republican Party are either clueless about anti-Semitism or actively encouraging it. 

…These forces used to be peripheral, voiced by marginal figures…Today senior Republicans emulate them. 

…The Republican Party is now squarely the party of Joe McCarthy.  – Fareed Zakaria,  GPS, November 3

There you go, folks, about as partisan, or anti-partisan as GMM gets.

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As Everyone Looks Right, Germany Is Swinging Left

Posted on November 3, 2018 by macromon

This is stunning and a shocker.

The support for Germany’s Green Party has doubled since the beginning of the year, while the right-wing Alternative for Germany (AfD), after peaking in the summer, is right back where it was.   The AfD, consisting mainly of nationalists and populists,  has sucked all the oxygen out of the political headlines in Germany over the past few years.

Check out the tracking poll here.

 

Posted in Euro, Germany, Uncategorized | Tagged , | 1 Comment

Trump v. Obama Jobs Market – Midterm Review

Posted on November 2, 2018 by macromon

The Bureau of Labor Statistics (BLS) released its final jobs report before the midterm election on Tuesday.

The pre-midterm final verdict is in.

The Obama economy created 423k more total non farm payroll jobs and 194k more private sector jobs in his administration’s last 21 months in office than did the Trump economy’s first 21 months.   The Obama economy averaged 216k monthly jobs while the Trump economy averaged 193k non farm payrolls.

Context is always good.  President Trump’s economy is impressive when considering it is running up against severe labor constraints as the unemployment rate hovers at multi-decade lows.   There is not a big pool of labor to draw from and wages are beginning to pick up due to these shortages.

Zero-Sum Game

Looking at the table below, we suspect the jobs market will now become a zero-sum game going forward.   For example,  employment growth in the Leisure and Hospitality has slowed under President Trump, while job growth in Mining and Logging sector has increased dramatically due to the rise in oil prices.   Could this be due to oil roughnecks quitting their bartending jobs and moving back to the oil patch?

We also suspect the retiring baby boomers are underfunded in their retirement and will remain in the workforce will beyond traditional retirement ages.

Macro Indicators

President Trump’s economy has generated, on average,  58 bps more wage growth over the similar 21-month periods.   Inflation is running a bit hotter under President Trump and the annual GDP growth rate has almost doubled, which indicates the economic treasures are still accruing disproportionately to capital.

 

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