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Tag Archives: energy

Opportunities in energy and gold

As the CRB Index decisively broke out to a new recovery high while breaking through both a horizontal resistance level and a falling downtrend that began in 2008, a divergence is appearing between crude oil and gold. The oil to gold ratio has strengthened to test a falling trend line.   This test of trend line resistance could present some opportunities for traders.   Extended energy Has The Economist done it again? Is the latest cover a contrarian signal of a pending top for...

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The Dramatic Rise in Energy Prices is Ultimately Deflationary

The Swiss had imposed negative rates on foreign currency deposits in the 1970s to counter the upward pressure on the franc, but Denmark became the first central bank to put its policy rate below zero in 2012.  There are now around $11.8 trillion of negative-yielding bonds, the least, incidentally, since mid-2020.  At the end of 2019, the value of bonds with a negative yield was slightly below $11.3 trillion. Nevertheless, the meaning and implications of negative-yielding interest rates...

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Weekly Market Pulse: Inflation Scare?

Bonds sold off again last week with the yield on the 10 year Treasury closing over 1.6% for the first time since early June. The yield is now down just 16 basis points from the high of 1.76% set on March 30. But this rise in rates is at least a little different than the fall that preceded it. When nominal rates fell from April through July, real rates fell right along with them. The nominal bond yield fell by 63 basis points and the 10 year TIPS yield fell by 57. That means that the drop was...

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Will the energy price surge cause a recession?

As energy prices surged around the world, I had an extensive discussion with a reader about whether the latest price spike could cause a recession. This is an important consideration for investors as recessions are equity bull market killers.  The evidence isn’t clear. On one hand, every recession in the post-War period (shaded grey zones) has been accompanied by rising oil prices. On the other hand, interest rates were also rising in virtually all of the cases. Oil shocks and...

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Hope Springs Eternal, or at least enough to Lift Risk Taking Today

Overview:  The animal spirits have been reanimated today.  Encouraged by the dramatic reversal in oil and gas prices, a deal in the US that pushes off the debt ceiling for a few weeks and talk of a new bond-buying facility in the euro area spurred further risk-taking today, ahead of tomorrow's US employment report.  The sharp upside reversal in US shares yesterday carried over in Asia and Europe today.  The Hang Seng, battered lately, jumped over 3%, and the Nikkei posted its first rise in...

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Chip Shortages, Crude Boiling, Fed Explosion And…No Inflation

An integrated circuit (IC) is a set of electronic circuits put together on one small, flat semiconductor medium. We call this thing a chip, and it is essential for so much of what we do in the modern computerized, digital world. Manufacturers can’t even produce cars without them.It stands to reason, then, that any shortfall or hitch in the availability of IC’s could be a huge economic problem with systemic implications. Thus, when some trade magazine which is closely following the physical...

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What’s Next?

As Q3 winds down and Q4 begins, the broad investment climate is being shaped by the turning of the monetary cycle.  Norway was the first, and New Zealand will be next.  It is not so much that these moves will force others to do the same. Instead, the Norges Bank and the RBNZ are simply ahead of the others.  Although there is speculation that the Bank of England can move before the end of the year, it seems a stretch.  The market feels increasingly confident that the Bank of Canada will raise...

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Ever Grand

Overview: Coming into yesterday's session, the S&P 500 had fallen in eight of the past ten sessions.  It closed on its lows before the weekend and gapped.  Nearly the stories in the press blamed China and the likely failure of one of its largest property developers, Evergrande.  Those that are prone to the sky-is-falling narratives refer to it as Lehman moment.  The S&P 's 2.7% decline yesterday was the largest in half of a year, and the VIX jumped to four-month highs. China, Taiwan,...

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Another chance to buy the panic

Preface: Explaining our market timing models  We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and...

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Commodity supercycle: Bull and bear debate

Is it too late to buy into the commodity supercycle thesis? The latest BoA Global Fund Manager survey shows that respondents have moved to a crowded long position in commodities. Many analysts have also hopped on the commodity supercycle train, myself included (see How value investors can play the commodity supercycle).  As a cautionary note, one reader alerted me to a well-reasoned objection on the commodity supercycle thesis. Much depends on China demand China watcher Michael...

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