Posts Tagged ‘bear markets’

1 Dec 1 2010 @ 10:50am by Matt Smith in energy consulting, Global Energy, Natural Gas, Random

The Holiday Season, And Its Path Back To Energy

Ok, we’re back in business on the burrito after going awol last week. We have now rolled into December like a  runaway snowball, and are straight into the swing of the most wonderful time of the year. Nonetheless, try as we may, energy is never too far from our minds. So here’s ten yuletide meanderings, with their paths back to energy: » read more

0 Oct 26 2010 @ 6:53am by Matt Smith in Natural Gas

If…

Err, I was working on a feature for the latest weekly outlook for clients, when I kinda got sidetracked by creating bar charts out of candy bars…..

If natural gas was a candy bar
it would probably be a Twix*;
The two bars = supply and demand
(and demand has a bite out of it).

If natural gas liked a beverage
It would have to be a beer;
Drowning all its sorrows -
at a low point for the year.

If natural gas was a building
It would have to be an Inn;
With storage full, production strong
Hence all rooms full within.

If natural gas was an animal
It would have to be a bear;
Growling…moody…kind-of stinks
(yet Charmin’ in its lair)*

*I am not sponsored, affiliated or in association with Charmin or Twix in any way, but would gladly endorse them going forward for very little money / freebies.

 

0 Aug 5 2010 @ 10:58am by Matt Smith in Capital Markets, Economy, risk management

The Sunny Side of the Street

I am a sucker for Satchmo, so presently we are going to take a walk on the sunny side of the street. Mixed economic data has made it easy to fret about the validity of a global recovery since we exited ‘the great recession’ last year, even though market behavior has indicated there is nothing to worry about (Treasury Secretary Tim Geithner says there still isn’t).

However, now that skepticism is growing that we may double dip (go to Google insights here to see its growing popularity), I find the contrarian in me wanting to look out in the great wide open to find some indicators that illustrate a positive picture. And trust me, it’s not that easy to do. However, here is what you can find if you direct your feet…to the sunny side of the street.

First up, a key barometer of economic activity: manufacturing. After a synchronized swan dive by the manufacturing sector across the world in 2008, activity has rebounded just as stomach-wrenchingly swiftly, like a sudden bout of turbulence. The chart below shows Purchasing Managers Indices for the manufacturing sector across time for major economic regions. It illustrates that manufacturing (the lion’s share of industrial production) across the globe has shown expansion for at least ten consecutive months ( a reading above 50 on the PMI indicates expanding economic activity). And although recent months have shown a slowing across the sector, we remain in positive terrain:

This next data point involves Warren Buffett’s favorite indicator - US weekly rail traffic. The Sage of Omaha follows this with fervor, as railcars are considered the lifeblood of the American economy, shipping goods across the country. The data illustrate that although rail traffic may not be showing stellar improvement (while also being well below pre-recessionary levels), it shows a steady pace of improvement year-over-year, a trend that a number of other economic indicators are illustrating:

We go no less random as we head to our final indicator – the US savings rate. The below chart illustrates how savings rates have bottomed out in the US in the last five years, as the over-leveraged US consumer has realized (or been forced to realize through tighter credit constraints) the need to borrow less and save more. But this rise in the savings rate is not necessarily a cause for concern - China’s savings rate of 38% certainly indicates an economy can grow rapidly even while saving significantly. So while a higher savings rate may mean somewhat less consumer spending, it also provides the fuel for investments in new productive assets in our economy, the ultimate long-term source of growth:

So there we have it; some reasons to be cheerful, 1-2-3. Sometimes it is easy to get swept along in a sea change of market sentiment, and it is good to look at the opposing view, regardless of if you buy into it or not. But if this has left you feeling rather fretful, just remember you can always put on some Satchmo, kick back, relax, and be swept away elsewhere.

0 May 21 2010 @ 9:23am by Matt Smith in Capital Markets, Crude Oil, Economy, Natural Gas, Random

Burrito bites

Happy Friday once again!!! (I am trying to soften the blow of a hard week through overuse of exclamation marks…a vain attempt to make things seem just that little bit better…!!!!!!!!!). So….as this week’s market action swirls around the plughole of time (anti-clockwise, for the majority of readers), let’s overlook the ucky stuff, because frankly, there’s not enough spoonfuls of sugar to help the medicine go down. Let’s place big bets on small mercies, and converge upon the canapés: 

–Ah, my people, my people….Brits float across lake on a bouncy castle.

 –The reality is that the world can’t live without deepwater oil.

–Solar power could produce 25% of global electricity by 2050.

–Hand washing helps us live with our choices.

–A battery that stores wind juice.

US leasing reforms for oil and gas are underway in light of the Gulf spill.

Shark-shaped sleeping bag.

–Last year’s economic turmoil caused global sales of natural gas to fall by 3.4%.

–Graphical representation of the four bad equity bear markets.

–The 3 Facebook settings every user should check now.

Scientists create synthetic life.

–Canadian Oil Sands set to become top US oil import.

–This is INSANE  – bike avoids car crash.

The Burrito Deluxe Award of the week goes to colleague (and burrito editor), Bradley T Samples, who is leaving us today and heading off for greener pastures. The absence of his intelligence, eccentricity, and general randomness will leave us less informed, less bemused, and also less entertained.   

The Burnt Burrito Award of the week is retained by the euro, for being an absolute and complete dog. Four year-lows and falling. At this point, it seems like an unsanctimonious break-up of the euro is not beyond the realms.

May your weekend be as fun as a wheel barrow full of monkeys.

1 May 13 2010 @ 9:58am by Matt Smith in Capital Markets, Crude Oil, Economy, Global Energy

A Little Trouble in Big China

Strike that, reverse it.

It’s a funny thing. China’s economic situation is like one of those salacious rumors you see on the cover of a glossy magazine at the grocery store; you never quite know if it’s true or not. Like the relationship of Brangelina, no-one really has a good handle on whether China is as perfect as everyone thinks. Sometimes we have to work from the facts that are available, while holding ourselves back so as to not fill in the blanks. So through proof and not the paparazzi, let’s take a look at the sleeping dragon. 

What has put China on the burrito chopping board in the first place was one of the ten simple points I outlined in last week’s post – about how Chinese oil demand will represent 10% of global oil demand this year, and how this will likely double by 2020 to 20% (and potentially surpass the US). While to truly understand this phenomenal rate of growth is a pinch unfathomable, the below chart provides a crystal clear picture of the trend for Chinese oil demand: 

 Just as celebrities inevitably face a backlash, China is receiving some negative attention from key market commentators, who are calling for a market crash in the next nine to twelve months. And this view isn’t completely without merit; cracks are appearing in the economy. This has recently manifested itself in Chinese stocks; the Shanghai SE Composite Index has now fallen over 20% from its highs made in August 2009 – statistically classifying it in a bear market. Then there are signs of slowing in data such as car sales, which are only up 34% year-on-year for April, when the previous month was up 63% (on the flipside, the number of households earning sufficient funds to buy a no-frills car, is estimated to nearly double over the next four years to 65.6 million). The manufacturing sector is also showing signs of slowing, although again it also remains expansionary. And then there is GDP, which is likely to have peaked for this year (albeit it at a nosebleed rate of 11.9% for Q1). The downside to China’s success means you essentially become a coconut shy for critics. 

As is common for fast-growing emerging market economies, inflation remains an ever-present threat. And China is well aware that an inflation rate at an 18-month high is a worry. But it is a tightrope that the Chinese authorities walk; the effect of raising interest rates or revaluing their currency is difficult to predict – it could quash growth rather than rein it in. Hence their enthusiasm to try such slowly slowly catchy monkey techniques such as incrementally raising the reserve requirements for banks (=essentially restricting bank lending), while trying not to halt expansion. It is easy to criticize China, but their reality is a case of tempering inflation while encouraging growth – like trying to open a can of soda with a hammer and a nail – it’s possible, but pretty darn hard. 

So, meanwhile, back at the chopping board, data show China to not be in bad shape, but with a clear need to remain vigilant on their economy. And like Brangelina, China needs to avoid the paparazzi and focus instead on themselves, because, afterall, we are all secretly envious of them.