Achtung, Kapitan!

Just when you thought the good ship S.S. Spoo had righted itself after a couple of nasty rogue waves, it went and hit a bit of uncharted reef late in Tuesday's session.  Morning ecstasy turned to afternoon despair, and you can just envisage a scene similar to that from a black and white WWII movie in which the German seaman shouts "Achtung, Kapitan!" when spotting Allied torpedoes approaching.

Let's get one thing clear: this is not 2008 redux, for the simple reason that the underlying stress in the real economy of most of the world is not nearly as significant as it was 8 years ago.  That having been said, there are pockets in which the current environment is worse than the GFC:

* China's real economy and shadow banking system are in worse shape.   Without delving into too many specifics, the authorities went all-out on stimulus in 08/09, not only borrowing from future growth but also encouraging an even more extreme misallocation of capital than was the case previously.

* Commodities have been hit by the twin storms of previous capex coming on line and reduced demand thanks to China and shifting demand patterns elsewhere.   Remember that a key plank in China's stimulus platform in response to the GFC was to engage in strategic purchases of key commodities.  It seems safe to say that that ain't happening this time around, and China's natural rate of demand is also ebbing with the economy downshifting to a lower growth profile.  In the US, the capex into oil extraction from alternative sources has naturally made the sector (and its debt) more vulnerable to sustained lower prices, given the relatively higher breakevens from extraction.

* Market microstructure.   At the risk of belaboring this point ad nauseum, it cannot be re-iterated enough how ephemeral the price on your screen is.  In many cases, there are no real market makers any more, only "liquidity providers" who can come and go as they please.  Brokers act on an agency basis, which means if you want to sell, the price you get is one that another punter (or "liquidity provider") wants to buy.  Unfortunately, that's not always the price at which you want to sell!

Of course, regulators have made noises in the past that less market liquidity is not necessarily a bad thing, as it exacts divine retribution on punters with the temerity to get their size and direction wrong. File this one under "be careful what you wish for, because you just might get it."

Macro Man was somewhat disgusted to see HFT shop Virtu trumpeting in the WSJ that Monday was one of its best ever days.   (This from the firm that famously never loses money.)   "We were there to catch the falling knives," they claimed, neglecting to mention that they also helped tip the knives off of the edge of the table to begin with!   One wonders what the regulatory reaction would have been had a bank or a bloke living over his Mum's garage had made a similar claim.

In terms of markets, yesterday's price action was obviously pretty poor- giving up a 70 point rally in the SPX is not a good thing, producing the dreaded "Satan's middle finger" candlestick formation.


The 30 level in the VIX remains a useful touchstone; although it was breached with Spooz at their ding-dong highs, the break could not hold, which was a significant warning signal.



It seems likely that the equity market will have another look at the downside today; at the time of writing 10 pm NY, Chinese equities aren't exactly blowing anyone away with their reaction to yesterday's policy easing- which itself was fairly close to the bare minimum that one could reasonably have expected.

For choice, however, Macro Man will be inclined to buy this dip (assuming it has materialized), as he would expect some sellers with weak hands to materialize, especially after Tuesday's price action.  It's not a particularly high conviction view, however, so the size will be very social indeed until some ancillary indicators give him a bit more confidence.

One final note, this time one bonds.  Yesterday's price action stank worse than a day-old kebab, particularly in Bunds, which couldn't get out of their own way.  One narrative circulating was that a sovereign that had spent some of its FX reserves defending its currency was ditching its lowest-yielding bonds to brings its portfolio back in line.   The story is eminently plausible, as there are plenty of candidates for FX reserve burn, and would you keep the bonds yielding less than 1%?

That Bunds could not manage to outperform BTPs this week is another indication of some fairly persistent selling pressure in the former.



Macro Man remains of the view alluded to yesterday that fixed income is not a bad way to fade the current rout in risk; sure, there is downside, but if the CBs are selling there is at least something of a backstop.  Either way, they didn't really rally when stocks were getting crushed and they got crushed when stocks rallied.   In the short run, at least, that divergence is telling you something; that the usual suspect owners of zillions of bonds have blanketed the press talking down Fed hikes (and up Fed easing) sends a similar message.

It would be nice, for once, if the beneficiaries of the most egregious misallocation of capital were forced to shout "Achtung, Kapitan!"

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Nico G
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August 26, 2015 at 7:58 AM ×

high VIX is here to stay. How exactly do you hedge your gamma short when Monday gap comes. And then Tuesday gap the other way. Do you have the nerves it takes if you started to sell spoo convexity say 6 years ago and they showed you how easy it was? Will you still hedge close to close or as it seems, your risk management is breathing down your neck as the opening bell ding dings. The last three sessions were enough to annihilate 4 months of theta for which you were hoping to be kindly paid at year end. While all is good at Virtu shop banks must be bleeding billions on capital markets already, short convexity ain't something you can ignore and sweep under a carpet until year end.

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Mr. T
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August 26, 2015 at 8:16 AM ×

If were talking about pockets where now is worse than GFC, the current state of FFR's shouldn't be off the list. There was a lot of potential energy available (and used) in '08 that is probably not there now. (Although I've seen enough Felix to know there is always something else available in that magic bag).

Is the end game here China dropping their peg? Rate cuts are only making it harder for them to keep it. If they had to choose, I suspect they would drop the peg to save their banks.

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Walter
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August 26, 2015 at 8:57 AM ×

Further Chinese interest rate cut, today?

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Anonymous
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August 26, 2015 at 9:10 AM ×

Great post MM, FX looks to be in Zombie mode... not knowing where to run. Will she or won't she..
Talk of Oct looks desperate for remaining EUR shorts IMHO

The Chinese price action looks like a classic vomiting camel formation....

This is just the warm up, the peg will have to be abandoned once the depth of rot in shadow banking becomes apparent to the locals



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Nico G
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August 26, 2015 at 9:14 AM ×

one issue doing the round is the dispute within EU on how to absorb and 'allocate' 4 million Syrian refugees

you gotta love the horrid hypocrisy of the Brits who welcome wealthy Arabs with both end to the point of changing some of London social landscape (Knightsbridge IS the Gulf), while crying about accepting a couple of hundreds refugees. Britain has become a disgusting selfish tax heaven for the wealthy and the crooks of the world but dead on fascist if you are a pauper

meanwhile Germany will take on 800,000 refugees. Yes, you read that right, do not be surprised if Donald Trump add a bit of German cabaret to his tour repertoire

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Anonymous
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August 26, 2015 at 9:20 AM ×

UK's problem is they wont tax the Knightsbridge crowd to pay for the Tower Hamlets crowd

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Nico G
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August 26, 2015 at 9:24 AM ×

of course they won't this is how they attracted them in the first place

meanwhile Faber - who else? - is having a good i told you so time on financial media:

'Preceding every bubble, you have a huge expansion of credit. That was the case in the period ’97 to 2000, and in the period 2003 to 2007, and on previous occasions in economic history. In the case of China, credit as a percent of the economy has grown by more than 50% over the last five years, which is essentially a world record. And in my view, its economy is slowing down rapidly. I had a drink with a friend of mine the other day who has car dealerships, luxury car dealerships, in China. He said sales have hit a brick wall. Not 'slowed down'; a brick wall. And indeed, exports were down and car sales were down in July. I think that this will then spill over again into other emerging economies because China is a large buyer of commodities and a large trading partner to other countries."

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Anonymous
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August 26, 2015 at 10:10 AM ×

China has sold as many Treasurys in the past 2 weeks (over $100 bn), as it has sold in the entire first half of the year. Anyone have any thoughts on this?

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Nico G
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August 26, 2015 at 10:24 AM ×

2 weeks ago i wrote that if you debase your currency your next smart step is selling your 'now even stronger USD' denominated paper

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Anonymous
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August 26, 2015 at 10:38 AM ×

"Britain has become a disgusting "
So 'disgusting' we have a constant battle to keep people out who are literally dying to get in. All of this morality from a guy who trumpets about a lifestyle split between various countries. Your morality is has wayward has most of your market calls.

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Error404
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August 26, 2015 at 10:48 AM ×

Nico G (@ 0914).

You're confusing 'the Brits' with the totally unrepresentative shower of self-interested hypocrites who were elected into power by a minority back in May. If we were into national stereotyping it could be said that:

1. Germans' treatment of Greece evidences an incurable national lust to:
a. Dominate.
b. Brutalise.

2. Germans' willingness to accept large numbers of refugees has as much to do with foreseeable demographic problems as with national philanthropy.

But it would be quite wrong to confuse the self-interested motivations and behaviours of the political class and their controlling oligarchs with the people themselves. That applies to 'the Brits' as much as to Germans or, indeed, anybody else.

That said, there are indeed plenty of people in the UK - and elsewhere - who see the refugee crisis as one foisted on them by the elites: Anglo-American permanent war policies, the desire for cheap labour in the business community, the utter ineffectiveness of the EU when it comes to formulating and executing policies beyond regulating the shape of aubergines, and the liberal media and Islington whingers who never have to deal directly with the consequences of what they advocate. There are people who are not racists, who are international in outlook but who quite legitimately don't want their communities overrun and transformed beyond recognition just because it suits the political, business, and financial elites.....

So we can add the eroding legitimacy of elites in the eyes of many countries' populations to MM's list of issues, which translates into a lack of trust and belief in the competence of institutions (incl. CBs). Fully back on-piste, we can also add exploding sovereign debt, the still deeply flawed European banking system, and the effect of income inequality and slow/no real wage growth on demand going forward. And that's without even going into structural issues in EMs, the EU, the US manufacturing economy, or Britain's Bovis and Barista 'recovery'.

No - this isn't 2008 redux. It could be the rumblings ahead of something far worse to come down the tracks.

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Nico G
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August 26, 2015 at 10:49 AM ×

what is wrong with living in different countries you anonymous asshole? and what is wrong with making market calls?

you seem to have issue with being a free man and freedom of speech at large

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Anonymous
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August 26, 2015 at 10:52 AM ×

Nico - US & EU geo-policy in MENA coming back to bite Europeans in the ass. Where did they think all those people displaced would go? If you destabilize an entire region, you best be prepared for consequences. Namely, migration as peiple flee to safety and potential terrorist attacks. Of course, the US is safe as ever due to its distance.

Upshot for demographics of Northern Europe?

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Nico G
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August 26, 2015 at 10:54 AM ×

Error 404

please spare me i know for a fact that you can buy residence and a passport in the UK. The price they ask is roughly 10% of your estimated assets, to be donated to various er, 'charities'

this did NOT start in May this practice has been around for years and brought all kind of dodgy Russians, Kazhaks Gulf arabs etc whose money UK decided had no smell and would not be taxable

nevertheless i apologize for attacking one country here and offending some this is a forum on markets not geopolitics. I have bad things to say on almost every country so do not take anything personally

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Nico G
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August 26, 2015 at 11:17 AM ×

anon 1052 100% agreed.

And how convenient it is for Daesh to see Europe inundated by masses from which they can easily recruit and form new cells

foreign policy skullduggery in MENA is at the root of most world unrest today and it only gets worse and worse

US armed talibans and Iran to weaken Soviet muslim border. Then armed Irak to fight backfiring Iran. Then armed ISIS to fight backfiring sunnis at large. They still have not learned one thing everyone they helped and equipped ended up hating US double agenda.

more recently, more of the same Europe armed mercenaries to take over Gaddafi whose arms ended up in the wrong hands now Europe fights in an empty desert - a great display and battle test of modern weaponery by some of the most notorious arm dealers (France). They finally registered the first foreign order for their overpriced Rafale jet fighter after that. Talk about an air show

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Mike
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August 26, 2015 at 11:47 AM ×

Agreed on most of what you are saying Nico, I do think those 800k migrants should have ended in US or UK to drive home the point, not sure about Hungary or Germany though.

Still, I think we are in much better shape then say 80 years ago so got to put this in a bit of perspective otherwise it's just gloom and doom, hopefully they don't mess it up more.

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Anonymous
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August 26, 2015 at 2:25 PM ×

"So we can add the eroding legitimacy of elites in the eyes of many countries' populations to MM's list of issues, which translates into a lack of trust and belief in the competence of institutions (incl. CBs)".

x2

What Nico said about Britain is also true for Australia and Canada...

Federal elections are being held in Canada on Oct. 19 and the left parties are leading in the polls!

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Marian Law
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August 26, 2015 at 2:29 PM × This comment has been removed by a blog administrator.
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winginit
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August 26, 2015 at 2:31 PM ×

After having, kind of, caught a neutron bomb (as MM put it. I like that) by buying DAX Monday afternoon (ECT) while VIX>30 and VVIX has gone crazy, I can now say that things developed the way I was hoping/betting on. Wingit is aware that he was taking a large risk volatility wise but its all just how you cut and slice it. It’s necessary not less risky to take a mega bet when volatility is low than a balanced one in a high volatility environment. In terms of P/L.

PBOC getting in there trying to calm things down, Durable goods looking good, I almost feel bullish ;) As others already have pointed out. Perhaps it’s a good thing if FED acts.

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hipper
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August 26, 2015 at 2:35 PM ×

Verbal easing and Gandalf to the rescue anyone? And not to belittle strong US retail sales either. Though of course it doesn't change anything with the gloomy longer term picture as we all know the difference between claimed benefits vs. real benefits of QE and the fading effect of the FX rate (which CB officials view as a major effect ofc) considering customers going elsewhere or broke. But would be surprised if this relief doesn't extend atleast a while longer as a result.

Would think if China dumps treasuries sufficiently enough to push yields up it would add USD strength, and right now the global market seems to be happily positively correlated with that. But that dip might gradually be bid through compensating flows from other parts of the world, and because the economy isn't really "ready" yet for significantly higher yields. Oil might not be going to 35 (just yet) and the EM bounce might be the idea for now.

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hipper
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August 26, 2015 at 2:37 PM ×

Corrected link: http://www.bloomberg.com/news/articles/2015-08-26/ecb-ready-to-expand-qe-if-needed-on-inflation-risks-praet-says

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Mr. T
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August 26, 2015 at 3:30 PM ×

At this point all we need is oil to catch a bid and I think we're off to the races.

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Nico G
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August 26, 2015 at 3:59 PM ×

i sold oil today (already) the tape is far too hesitant for my taste. Some steady selling into the last 60mn on european equities we are really not out of the woods yet

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Anonymous
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August 26, 2015 at 4:44 PM ×

VIX and VVIX levels and intraday movements continue to suggest MKT will need weeks to settle down - maybe months

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Nico G
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August 26, 2015 at 4:48 PM ×

...and the VAR models in banks will be impacted for the next two years so expect prop trading activity to diminish accordingly

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washedup
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August 26, 2015 at 5:17 PM ×

T - other than the fact that nico the master timer doesn't like it, I can't find anything negative about oil fundamentals in the short term other than sentiment and general hatred - mind you I have been bearish commodities for about as long as I have been posting here - I don't know whats the tail and whats the dog, but either bonds are on drugs to be getting sold in the last two days, or inflation expectations may have reached a short term bottom - the last time that happened crude turned and rallied about 30%.

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Dan
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August 26, 2015 at 5:29 PM ×

"one issue doing the round is the dispute within EU on how to absorb and 'allocate' 4 million Syrian refugees"

EU per capita income of $35,000.

That's a $140 billion hole to fill if per capita income is to stay constant.

Fail.

What did Aldo Rain say?

Grat-zeeee.

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Nico G
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August 26, 2015 at 5:42 PM ×

hey wash/T same page on oil - i only dipped a toe yesterday LONG at close so today i was only selling a long, not shorting (absolutely no way). Call it premature ejaculation it distracts me from equity index swings ill have to book energy trades somewhere else . I am super bullish on oil and already long bovespa futures (Brazil) as a proxy of all things EM/oily.

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Nick
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August 26, 2015 at 6:15 PM ×

It has been pointed out to me that since we are heading into refinery maintenance period, US crude consumption will take a hit of about 1.5 million barrels a week for at least 4 week. While today stock numbers were surprisingly low, especially relative to expectation, the reduction came from low imports and not from reduced production. Hence it is hard to see oil going anywhere but lower until the seasonal demand improves and/or US production takes a hit.

Nevertheless I can’t shake out form my head the idea that OPEC did completely misjudged the situation and propensity of free market enterprises to survive becoming more efficient and cutting costs. US shale producers will be just fine at oil any level of price that the market can sustain in a long run, be it 30, 60, or 90 USD. While Saudi Arabia as a country / nation can be considered as one massive oil Co with major costs that could not be reduced. Those are not the fixed and variable costs of oil extraction but the cost of keeping the population relatively content and extending the country influence in the region. The reports of budget cuts initiatives are sound bites not more.

The risk for any oil producer nation or the company is not the reserves or the price but simply the potential that will soon become the reality of cheap alternatives and improved efficiency of any energy utilising mechanism. Taking this into account the optimal strategy would be to maximise the revenue through price and not volume. There is no point in taking 50% revenue cut for marginal increase in market share.

OPEC and Saudi probably understands this point by now, the gamble failed, time to move on and try a different strategy.

That makes me bullish in the face of negative seasonality, potential demand issues or increased US production (actually if anything increased US production while prices are high might help OPEC to mitigate the impact of US export ban abolition or even aver it altogether).

On the other hand the tape is heavy, and the people a banding around a lot of low price levels.

Anyway, once always has to have a view and my view is long.


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Anonymous
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August 26, 2015 at 6:30 PM ×

German GDP. Internals not so great:

@edward_hugh tweets

German Q2 GDP largely a net exports story (added 0.7 pps) to 0.4% headline growth. Total domestic uses -0.3 pps.

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washedup
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August 26, 2015 at 6:42 PM ×

Nick - all that bearish stuff is quite well known, and we are reminded of it about 500 times a day - supply will not go down I fully accept it and have been a proponent of the idea for a long time.
Here is what's not getting enough attention - US oil demand, especially gasoline, is REALLY strong - I initially faded this, but 3 quarters of data has been enough to convince me that there is more price elasticity than I initially thought - I have been in energy for 2 decades and the last time I saw this kind of % YoY growth was in 2003, and it was in CHINA!
It is a bit of a head scratcher - this was not supposed to happen, but it gives me some pause on the 'we are going straight down to $20' view that I initially espoused. I have been wondering if crude is a 35-50$ long run product and not $20-35.

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Nick
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August 26, 2015 at 7:01 PM ×

Thanks, washedup, now the question is what is going to push oil higher from here: short covering on any random spike that will carry trend followers out (selling is relentless so far); Saudi reversing course (somebody would have to take the fall for that blunder); China still being on the map and buying consistently over (they probably will but that's nothing new)? Why would we turn here?

Another interesting market to look it is vegetable oils: palm, soy, rape (canola) and sunflower. All of them have own internal dynamics but all of them are hit through weak gasoil price and lack of biodiesel demand. Palm will move once gasoil turns. But even more interesting is soybean oil: it is a domestic market in US, with minor exports, stable internal consumption in food and industry and biodiesel demand guaranteed through EPA RFS mandate.

Mandate would probably be increased in November if EPA confirms the current proposal, and as for exports US is cheaper and more competitive than Argentina and Brazil, so bound to capture some market. Even in 2008/2009 with gasoil trading lower soybean oil did not go to the current levels. In the absence of extreme positioning my guess is it shows the power of market maker models / trend followers. Supply and Demand will have an upper hand though sooner or later.

Here we go, some colour from ags world.

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washedup
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August 26, 2015 at 7:11 PM ×

Nick - as much as energy fundamentals focused guys (I, and presumably u being one of them) would like to think that all that stuff matters, in the short term the only factor that matters for crude flat price (not spreads) , is whether macro punters require a deflation hedge or an inflation proxy. 5 yr/5 yr BE's move first, then XLE (the energy basket), and finally crude gets off the mat, thereby making it all a nice wonderful self fulfilling feedback loop in both directions - we have already seen that autocorrelated madness twice this year, and we will probably keep seeing it in the future.
Good luck - I do like your soybean idea but don't know how to play it.

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Nick
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August 26, 2015 at 7:26 PM ×

Thanks washedup - the simple way is just to buy Chicago soybean oil futures, they are liquid. There is a component of beans availability and crop size in this trade but at current levels it is probably not that significant.

Slightly more complex way is to buy soybean oil futures and sell soybean meal futures - this is something called "oil share", oil and meal being the products of soybean crush. This helps to mitigate soybean price link and dependence on crop size.

Meal does have very different demand structure to oil, with heavy exports which so far are well behind last marketing year's pace. Oil share might work better but could be much more volatile position to hold.

At the end of the day right now it comes down to gasoil price, and so far being long soybean oil or oil share was a very painful experience.

But hey, S&D are important.

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Nick
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August 26, 2015 at 7:44 PM ×

5y5y BE's seem to be slightly more alive now, XLT is barely off the ground, XOM is fighting, let's see if this continues and spills over to oil

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Mr. T
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August 26, 2015 at 7:51 PM ×

I'm surprised VIX is still north of 30. I may be consistently underestimating the legs of this pullback - the themes people are talking about just don't scare me yet. It's great how easy it is, and how many choices one has, to express a short-vol sentiment these days.

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washedup
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August 26, 2015 at 8:48 PM ×

T - I agree with the other poster (anon) who commented vix may stay elevated for a couple of months - to me that means a 20-35 range instead of a 12-24, but others may disagree - that said, I can't imagine the theta bleed for punters if this market doesn't go anywhere much in the next few weeks - I know that seems impossible to imagine after what we just went through, but its actually more normal to markets to consolidate after moves like these than to continue slashing their wrists on a daily basis.

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Anonymous
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August 26, 2015 at 9:11 PM ×

BTFD looks like it will be vindicated.

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Mr. T
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August 26, 2015 at 9:16 PM ×

Another day of this and we are back in the ytd range, things cool down and it gets chalked up as another late-summer low liquidity opportunity.

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Anonymous
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August 26, 2015 at 10:00 PM ×

Nick, I am bullish oil but for the opposite reason. Shale oil does not work at 30 bucks, it barely works at 60. Most shale companies keep producing by the good graces of their investors who keep giving them more money to burn cash digging more wells. The shale industry would barely exist if Capex was more accurately labelled as opex. When EOG trades at $45 then the shale shakeout is complete and you know money will be invested in wells when it makes economic sense, this could happen at current or much higher oil prices.

Most of the cost improvements are just what u normally get when theres an oversupply of equipment and labour - 20+% across the board easy. However the underlying tech has not changed and will always put shale at the q3/q4 on oil cost curve. Some companies have arbitrarily boosted EUR's just to goose net income whilst others have increased frack stages to show a high 30day IP but subsequent declines have been agressive. There is lots of BS said in this space. Im bullish oil medium term because most new supply (outside iran and Iraq) such as shale and offshore needs 80-100 buck oil to be truly economic so I believe the range should be 50-100 bucks (50 to choke off shale and 100 to ramp it up)

I would speculate the Saudi's were surprised that investors handed over $50bn to buy securities in H1 from shale companies burning huge amounts of cash (particularly if you take out the hedges). I think Saudi will respond if there is a genuine demand issue. In the absence of that it would make sense for them to cut back later this year/early next year after the borrowing base resets on shale co's although perhaps they aren't that micro

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Nick
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August 26, 2015 at 10:23 PM ×

Thanks for indepth reply, it is hard to get balanced coverage and good understanding of the industry if you are not involved on a day to day basis. It follows from your comment that the strategy is actually working and there is no reason for the reversal. One thing to note though is the tendency to overreaction, which might lead to some form of action from OPEC in the near future. Saudi did go silent since the oil at about 60.

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Anonymous
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August 27, 2015 at 12:04 AM ×

Western Canadian Crude Oil Stockpiles Rise to a Record Level at 27 million barrels

http://www.wsj.com/articles/western-canadian-crude-oil-stockpiles-rise-to-a-record-1440620677


Western Canada Select closed today @ $23.85

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Anonymous
admin
August 27, 2015 at 12:09 AM ×

Noitce $VIX still closed over 30...& still 6.7 over September. If you plan on shorting VIX products, better hope we don't go down big again

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Mr. T
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August 27, 2015 at 12:16 AM ×

Anon1000 says: However the underlying tech has not changed and will always put shale at the q3/q4 on oil cost curve.

I just don't see this. I understand that there are a lot of moving parts, that some acres are richer than others, but the underlying technology did not even exist a decade ago, and continues to improve in what looks like pretty dramatic fashion. It's not just the drilling (although there are huge advances being made there as well), but the geology and the tinkering with the idiosyncrasies of each field and whatnot. Then you have improvements from the other side in the form of increasing realizations as gathering and takeaway infrastructure gets built to support the new wells & fields. Now maybe I've been reading too many company presentations and not enough 10ks, but the story appears compelling.

When you look at multi-year production by country, its pretty clear that the resurgence of the US is driving higher global production levels. Put another way, ex-shale the peak oil guys were basically right. What changed was a real technical breakthrough in production (perhaps facilitated by higher prices and low rates), but the market has become much more of a technical arms race then it was 10 years ago. Now who's going to win in that fight - the US or Angola? Venezuela? Iraq? Petrobras?

From the perspective of the investors who keep giving them more money to burn cash digging more wells the US companies look like better credits in many ways to me than getting involved with Venezuela or Iran. Many of the giant overseas fields are basically only able to produce via the good graces of the western supermajors who do the work anyways, sometimes getting jerked around plenty by local governments anyways. I suspect that given the curves, the future of many of the global fields etc, the supermajors will also see full-life value in US unconventional production.

I think a lot of this discussion starts with a look at the horrowshow of their FCF, but those budgets were made with $100+ oil. If next year we are looking at FCF neutral isn't the tenor of the conversation going to change a lot - from going concern to essentially a perpetual call on higher prices and increasing efficiency?


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Anonymous
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August 27, 2015 at 2:53 AM ×

Chinese law limits individual money transfers of $50,000 every year, but underground banks have thrived as a channel to send money out of the country. These activities now pose a threat to China's "financial safety" and foreign exchange regime, said Meng Qingfeng of the Ministry of Public Safety.

http://www.telegraph.co.uk/finance/markets/11824478/Black-Monday-fears-come-back-to-spook-panicked-investors.html

this could take the bid out of Pacific Rim real estate...... Mr Wong the telephone bidder appears to have been cut off?

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Anonymous
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August 27, 2015 at 12:32 PM ×

The shale patch is in bust mode, following a boom brought about by years of easy money. Soon it will be over and done for good as the banks redetermine credit lines in the next couple of months. Half the rigs have been laid down in the big three shale basins. Most of the rest will be rusting away in the yards by the end of the year.

Rossmorguy

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Hwa Jurong
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September 8, 2015 at 2:58 PM × This comment has been removed by a blog administrator.
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