- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
The Global Commodities Bottom
Posted on 3/20/16 at 12:36 pm
Posted on 3/20/16 at 12:36 pm
It seems likely now that the global commodities price slump hit its low trough sometime in late January. I would say this means that U.S. corporations are probably out of the woods in terms of absorbing global shocks, but that global QE has so far still prevented the global slump to be reflected in U.S. equity prices. Thus, I still expect a big correction to the S&P 500 this year.
The Shanghai Composite Index ( SSE) hit a low (i.e., since Nov 2014) of 2,655.66 on Thursday, January 28, 2016. (Jun 2015 peak = 5,166.35)
The Shenzhen Composite Index ( SZCOMP) hit a low (i.e., since Sep 2015) of 1,643.36 on Monday, February 29, 2016. (Jun 2015 peak = 3,140.66)
Hong Kong's Hang Seng Index ( HSI) hit a low (i.e., since Jun 2012) of 18,278.80 on Friday, February 12, 2016. (Apr 2015 peak = 28,588.52)
The ETF ( AFTY) for the FTSE/Xinhua Chinese A50 Mainland Stock Index hit a low of 11.09 on Thursday, February 11, 2016. (Jun 2015 peak = 21.19, adjusted down from 24.75 due to dividends)
The ETF ( CRBQ) for the Thomson Reuters/Jefferies CRB Global Commodity Index hit a low of 24.92 on Wednesday, January 20, 2016. (Apr 2011 peak = 49.63, adjusted down from 54.63 due to dividends)
The value of the EUR in USD stood at 1.1318 on Thursday, March 17, 2016, up from 1.0868 on Wednesday, March 2, 2016. This was up from an even further low of 1.0565 on November 30, 2015. This is down from 1.5750 in May 2008. So the USD is of course doing the opposite of that in FX markets, having appreciated significantly versus other currencies since 2008, but having slid about 5% in recent weeks. (See the concomitant rise in USD-denominated oil prices.)
We saw this with the language in the recent FOMC decision last week, where the Fed is cooling on the idea of future rate hikes for 2016, even while consumer inflation seems to finally be rising.
Yes, there was the story from last Tuesday where " Retail Sales in U.S. Decline After January Revised Down", and genuine downside surprise at the following: "The 0.1 percent decline in purchases followed a revised 0.4 percent January decrease, Commerce Department figures showed Tuesday. Sales excluding gasoline rose 0.2 percent in February, reversing the previous month’s retreat."
Still, core inflation for the past 6 months (see BLS) has been 0.2%, 0.2%, 0.2%, 0.2%, 0.3%, 0.3%, which is a good sign that core inflation is heading over 3%, which is a good thing. The Feb 2016 CPI was only 237.111, compared with 232.166 in Feb 2013--not much movement in 3 years' time. It helps now that the civilian employment ratio (see BLS) is finally rising, going up to 59.8% in Feb 2016 from 58.9% in Feb 2015. Wage growth still isn't showing up very much ( LINK), but Elad Pashtan at Goldman Sachs recently asserted that it is inevitable that wages will rise and eat into corporate profit margins: " Goldman Sachs: Get Ready for Labor to Crush Capital in the U.S." (3/7/16). Also, the Atlanta Fed's GDPNow Tracker is predicting 1Q growth of only 1.9%. Which brings us finally to the U.S. stock market and the two threads I made here in recent months...
Nov. 1, 2015: " They say to never time the market... but it looks like it's time to go short"
Jan. 4, 2016: " Tracking the Shanghai & Shenzhen markets: AFTY nears its August trough"
Will the S&P 500 EPS stats ever materialize to something close to the $120/year projections of some analysts? Or will reality finally bite into asset prices that have been overly inflated by QE?
The Shanghai Composite Index ( SSE) hit a low (i.e., since Nov 2014) of 2,655.66 on Thursday, January 28, 2016. (Jun 2015 peak = 5,166.35)
The Shenzhen Composite Index ( SZCOMP) hit a low (i.e., since Sep 2015) of 1,643.36 on Monday, February 29, 2016. (Jun 2015 peak = 3,140.66)
Hong Kong's Hang Seng Index ( HSI) hit a low (i.e., since Jun 2012) of 18,278.80 on Friday, February 12, 2016. (Apr 2015 peak = 28,588.52)
The ETF ( AFTY) for the FTSE/Xinhua Chinese A50 Mainland Stock Index hit a low of 11.09 on Thursday, February 11, 2016. (Jun 2015 peak = 21.19, adjusted down from 24.75 due to dividends)
The ETF ( CRBQ) for the Thomson Reuters/Jefferies CRB Global Commodity Index hit a low of 24.92 on Wednesday, January 20, 2016. (Apr 2011 peak = 49.63, adjusted down from 54.63 due to dividends)
The value of the EUR in USD stood at 1.1318 on Thursday, March 17, 2016, up from 1.0868 on Wednesday, March 2, 2016. This was up from an even further low of 1.0565 on November 30, 2015. This is down from 1.5750 in May 2008. So the USD is of course doing the opposite of that in FX markets, having appreciated significantly versus other currencies since 2008, but having slid about 5% in recent weeks. (See the concomitant rise in USD-denominated oil prices.)
We saw this with the language in the recent FOMC decision last week, where the Fed is cooling on the idea of future rate hikes for 2016, even while consumer inflation seems to finally be rising.
Yes, there was the story from last Tuesday where " Retail Sales in U.S. Decline After January Revised Down", and genuine downside surprise at the following: "The 0.1 percent decline in purchases followed a revised 0.4 percent January decrease, Commerce Department figures showed Tuesday. Sales excluding gasoline rose 0.2 percent in February, reversing the previous month’s retreat."
Still, core inflation for the past 6 months (see BLS) has been 0.2%, 0.2%, 0.2%, 0.2%, 0.3%, 0.3%, which is a good sign that core inflation is heading over 3%, which is a good thing. The Feb 2016 CPI was only 237.111, compared with 232.166 in Feb 2013--not much movement in 3 years' time. It helps now that the civilian employment ratio (see BLS) is finally rising, going up to 59.8% in Feb 2016 from 58.9% in Feb 2015. Wage growth still isn't showing up very much ( LINK), but Elad Pashtan at Goldman Sachs recently asserted that it is inevitable that wages will rise and eat into corporate profit margins: " Goldman Sachs: Get Ready for Labor to Crush Capital in the U.S." (3/7/16). Also, the Atlanta Fed's GDPNow Tracker is predicting 1Q growth of only 1.9%. Which brings us finally to the U.S. stock market and the two threads I made here in recent months...
Nov. 1, 2015: " They say to never time the market... but it looks like it's time to go short"
Jan. 4, 2016: " Tracking the Shanghai & Shenzhen markets: AFTY nears its August trough"
Will the S&P 500 EPS stats ever materialize to something close to the $120/year projections of some analysts? Or will reality finally bite into asset prices that have been overly inflated by QE?
This post was edited on 3/20/16 at 1:02 pm
2
Posted on 3/20/16 at 12:36 pm to Doc Fenton
Here is some more recent news from the world of high finance:
Bloomberg (3/4/16): " Jim Rogers: There's a 100% Probability of a U.S. Recession Within a Year"
Investors.com (3/7/16): " BofA Job Cuts Belie Rosy Employment News"
"Citing slower economic growth, Bank of America reported having 213,000 employees worldwide at the end of the year — or just 3,000 more than in 2007. The Charlotte, N.C.-based giant has eliminated almost 74,000 jobs since the recession, including 10,000 last year, many of them high-skill, executive-level positions. That’s a quarter of the bank’s workforce. / The head count could dip below 200,000, according to the Charlotte Observer, as the ax falls next on marketing and communications jobs."
Yahoo (3/11/16): " The Fed Caused 93% of the Entire Stock Market's Move Since 2008: Analysis"
Vanity Fair (3/16/16): " Silicon Valley’s Tech Employees Are Getting Nervous" (Are the so-called unicorns in the SF area about to feel a slump?)
Bloomberg (3/17/16): " Wall Street's Awful Quarter Is Hitting Goldman Sachs, Too" (I-banks are predicting 1Q earnings falling about 25% YoY.)
And then there was this interesting article on sector P/E ratios...
CNBC (3/9/16): " Why a low price-to-earnings ratio isn't always a good thing"
S&P 500 P/E Ratios by Sector
(Sector, Latest, 10-Yr Avg., High, Low)
S&P 500, 15.7, 13.9, 17.4, 9.5
Consumer Discretionary, 17.0, 16.5, 27.2, 12.1
Consumer Staples, 20.4, 16.0, 20.4, 11.2
Energy, 44.9, 13.3, 44.9, 5.9
Financials, 12.0, 12.3, 17.6, 7.8
Health Care, 14.6, 13.9, 17.9, 9.3
Industrials, 14.9, 14.4, 16.9, 8.5
Information Technology, 15.0, 14.9, 20.6, 10.4
Materials, 15.7, 14.6, 22.8, 8.5
Telecommunication Services, 13.2, 14.5, 19.6, 9.0
Utilities, 16.7, 14.2, 18.1, 9.1
S&P Peaks & Troughs
03/06/2009: 666.79
05/21/2015: 2,134.28
10/30/2015: 2,079.36
01/20/2016: 1,812.29
03/18/2016: 2,052.36
NOTE: By the way, the S&P 500 did finally cross the 200-day moving average ( LINK), which is now at 2,017.86.
Finally, while we don't get to hear the great Lawrence Yun present NAR's numbers until tomorrow, the U.S. housing market has been creeping:
WSJ (2/22/16): " Bank of America’s Newest Mortgage: 3% Down and No FHA"
"Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans."
Bloomberg (2/25/16): " U.S. Home Prices Rose 5.8% in Fourth Quarter From Prior Year"
"The median price of an existing single-family home in the U.S. was $222,700 in the fourth quarter, up 6.9 percent from a year earlier, according to the Realtors group."
A lot of people have speculated that this was from rich Chinese people making cash purchases as one of their few options to get their money out of China and invested elsewhere, but who really knows, right? It certainly doesn't seem very reassuring that a bank hemorrhaging jobs is simultaneously returning to looser mortgage lending practices.
So in conclusion, while I am not confident enough to put my money on the line with a short position, I am completely out of the stock market, and I am still thinking that my prediction from the end of October 2015 still holds: "the S&P 500 might dip to around 1,800 or lower by next summer/fall."
Bloomberg (3/4/16): " Jim Rogers: There's a 100% Probability of a U.S. Recession Within a Year"
Investors.com (3/7/16): " BofA Job Cuts Belie Rosy Employment News"
"Citing slower economic growth, Bank of America reported having 213,000 employees worldwide at the end of the year — or just 3,000 more than in 2007. The Charlotte, N.C.-based giant has eliminated almost 74,000 jobs since the recession, including 10,000 last year, many of them high-skill, executive-level positions. That’s a quarter of the bank’s workforce. / The head count could dip below 200,000, according to the Charlotte Observer, as the ax falls next on marketing and communications jobs."
Yahoo (3/11/16): " The Fed Caused 93% of the Entire Stock Market's Move Since 2008: Analysis"
Vanity Fair (3/16/16): " Silicon Valley’s Tech Employees Are Getting Nervous" (Are the so-called unicorns in the SF area about to feel a slump?)
Bloomberg (3/17/16): " Wall Street's Awful Quarter Is Hitting Goldman Sachs, Too" (I-banks are predicting 1Q earnings falling about 25% YoY.)
And then there was this interesting article on sector P/E ratios...
CNBC (3/9/16): " Why a low price-to-earnings ratio isn't always a good thing"
S&P 500 P/E Ratios by Sector
(Sector, Latest, 10-Yr Avg., High, Low)
S&P 500, 15.7, 13.9, 17.4, 9.5
Consumer Discretionary, 17.0, 16.5, 27.2, 12.1
Consumer Staples, 20.4, 16.0, 20.4, 11.2
Energy, 44.9, 13.3, 44.9, 5.9
Financials, 12.0, 12.3, 17.6, 7.8
Health Care, 14.6, 13.9, 17.9, 9.3
Industrials, 14.9, 14.4, 16.9, 8.5
Information Technology, 15.0, 14.9, 20.6, 10.4
Materials, 15.7, 14.6, 22.8, 8.5
Telecommunication Services, 13.2, 14.5, 19.6, 9.0
Utilities, 16.7, 14.2, 18.1, 9.1
S&P Peaks & Troughs
03/06/2009: 666.79
05/21/2015: 2,134.28
10/30/2015: 2,079.36
01/20/2016: 1,812.29
03/18/2016: 2,052.36
NOTE: By the way, the S&P 500 did finally cross the 200-day moving average ( LINK), which is now at 2,017.86.
Finally, while we don't get to hear the great Lawrence Yun present NAR's numbers until tomorrow, the U.S. housing market has been creeping:
WSJ (2/22/16): " Bank of America’s Newest Mortgage: 3% Down and No FHA"
"Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans."
Bloomberg (2/25/16): " U.S. Home Prices Rose 5.8% in Fourth Quarter From Prior Year"
"The median price of an existing single-family home in the U.S. was $222,700 in the fourth quarter, up 6.9 percent from a year earlier, according to the Realtors group."
A lot of people have speculated that this was from rich Chinese people making cash purchases as one of their few options to get their money out of China and invested elsewhere, but who really knows, right? It certainly doesn't seem very reassuring that a bank hemorrhaging jobs is simultaneously returning to looser mortgage lending practices.
So in conclusion, while I am not confident enough to put my money on the line with a short position, I am completely out of the stock market, and I am still thinking that my prediction from the end of October 2015 still holds: "the S&P 500 might dip to around 1,800 or lower by next summer/fall."
This post was edited on 3/20/16 at 7:33 pm
Posted on 3/20/16 at 1:07 pm to Doc Fenton
quote:
It seems likely now that the global commodities price slump hit its low trough sometime in late January.
Why do you say this. In simpleton terms please. I'm not that smart.
Posted on 3/20/16 at 1:15 pm to Iowa Golfer
Because I think the shock in reduced global consumption expectations (mostly from China) has largely passed. I still think China is facing economic stagnation going forward, but only in a relative sense (maybe 4% GDP growth?). Overall though, I'd say the situation over there has stabilized into a new normal of mediocrity.
So unless some new unexpected global macro shock occurs, I think commodities have likely bottomed. This is especially true in USD-denominated terms, since a lot of the global commodities slump was correlated to an appreciation in the dollar that probably won't continue going forward, given the core inflation numbers we're starting to see.
So unless some new unexpected global macro shock occurs, I think commodities have likely bottomed. This is especially true in USD-denominated terms, since a lot of the global commodities slump was correlated to an appreciation in the dollar that probably won't continue going forward, given the core inflation numbers we're starting to see.
This post was edited on 3/20/16 at 1:20 pm
Posted on 3/20/16 at 2:06 pm to Doc Fenton
OK, thanks. I track aluminum, copper and steel industrial demand, and demand, and don't see these as bottomed out yet.
Doesn't mean I'm right, I was just curious.
Doesn't mean I'm right, I was just curious.
Posted on 3/20/16 at 5:15 pm to Doc Fenton
I didn't read this particular article,
"WSJ (2/22/16): " Bank of America’s Newest Mortgage: 3% Down and No FHA" "Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans."
but I've read about this mortgage's creations and the reasoning behind it. I'm pretty certain the risk is largely shifted to the bondholders for BoA's new mortgage creation. So if the risk stays with bondholders after the mortgage is sold off, I have no issue with this.
You put some time into this, and I had some time today, so I read through your posts, and a large number of the linked articles.
The retail sales following the revised GDP number is the thing that stands out to me.
I'm not out of the stock market, but I do have, and have had, a large amount of cash on the sidelines, where it will stay for a while. I took a lot of profit, probably too soon, on the market's run up quite a while ago.
I missed some of the upside with the percentage I took out, but I also have some liquid funds to plunge in when it is time again. The liquid funds were enhanced by my VIX insurance, which is back to me paying a premium and not collecting, or filing a claim so to speak. At least for now.
Anyway, the chart and technical guys get laughed at, but it seems to me that the most successful traders use a combination of technical and fundamental analysis. At least they say they do on the tv shows. CBOE guys are trying to figure out if the VIX just had a death cross. Not exactly a great thing for a continued bull market.
I'm just hanging out. Not 100% out like you seem to be. I never am 100% out. But I'm out the way I define it. And I agree this market was largely driven by monetary policy, which always has bothered me, but that's usually the way it is in modern times.
Edit. "A lot of people have speculated that this was from rich Chinese people making cash purchases as one of their few options for get their money out of China and invested elsewhere, but who really knows, right? It certainly doesn't seem very reassuring that a bank hemorrhaging jobs is simultaneously returning to looser mortgage lending practices."
I know my South Florida properties have significantly recovered. Anecdotal only, but there is a lot of foreign investment down there. Has been for as long as I've been going there, and since I've owned there. I've not heard of Chinese monies flowing in. Tahe that for what it's worth. Guys like Peter Zalewski, and whomever is wholesaling would probably know this. I wish the Chinese would come into Iowa and buy some of my stuff that I don't want to deal with any longer.
"WSJ (2/22/16): " Bank of America’s Newest Mortgage: 3% Down and No FHA" "Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans."
but I've read about this mortgage's creations and the reasoning behind it. I'm pretty certain the risk is largely shifted to the bondholders for BoA's new mortgage creation. So if the risk stays with bondholders after the mortgage is sold off, I have no issue with this.
You put some time into this, and I had some time today, so I read through your posts, and a large number of the linked articles.
The retail sales following the revised GDP number is the thing that stands out to me.
I'm not out of the stock market, but I do have, and have had, a large amount of cash on the sidelines, where it will stay for a while. I took a lot of profit, probably too soon, on the market's run up quite a while ago.
I missed some of the upside with the percentage I took out, but I also have some liquid funds to plunge in when it is time again. The liquid funds were enhanced by my VIX insurance, which is back to me paying a premium and not collecting, or filing a claim so to speak. At least for now.
Anyway, the chart and technical guys get laughed at, but it seems to me that the most successful traders use a combination of technical and fundamental analysis. At least they say they do on the tv shows. CBOE guys are trying to figure out if the VIX just had a death cross. Not exactly a great thing for a continued bull market.
I'm just hanging out. Not 100% out like you seem to be. I never am 100% out. But I'm out the way I define it. And I agree this market was largely driven by monetary policy, which always has bothered me, but that's usually the way it is in modern times.
Edit. "A lot of people have speculated that this was from rich Chinese people making cash purchases as one of their few options for get their money out of China and invested elsewhere, but who really knows, right? It certainly doesn't seem very reassuring that a bank hemorrhaging jobs is simultaneously returning to looser mortgage lending practices."
I know my South Florida properties have significantly recovered. Anecdotal only, but there is a lot of foreign investment down there. Has been for as long as I've been going there, and since I've owned there. I've not heard of Chinese monies flowing in. Tahe that for what it's worth. Guys like Peter Zalewski, and whomever is wholesaling would probably know this. I wish the Chinese would come into Iowa and buy some of my stuff that I don't want to deal with any longer.
This post was edited on 3/20/16 at 5:21 pm
Posted on 3/20/16 at 7:48 pm to Iowa Golfer
quote:
I'm pretty certain the risk is largely shifted to the bondholders for BoA's new mortgage creation. So if the risk stays with bondholders after the mortgage is sold off, I have no issue with this.
I have no issue with BoA doing this. I'm only using it as anecdotal evidence that the housing market seems frothy to me. We'll know more about that with tomorrow's data.
quote:
You put some time into this, and I had some time today, so I read through your posts, and a large number of the linked articles.
Glad to hear it. I'm taking a very high 30,000-foot view of everything here on a macro level, so not all of my individual links will hit the mark as being high quality analysis. I'm hoping that together, though, it will all add up to a coherent story to follow over a long time horizon.
quote:
The retail sales following the revised GDP number is the thing that stands out to me.
It's a bad sign for corporate earnings for sure (as if there weren't enough already), but the core inflation is what caught my eye, as we have not seen it tick up to these levels in a very long time.
quote:
Anyway, the chart and technical guys get laughed at, but it seems to me that the most successful traders use a combination of technical and fundamental analysis. At least they say they do on the tv shows. CBOE guys are trying to figure out if the VIX just had a death cross. Not exactly a great thing for a continued bull market.
I had EMH drilled into me in college, but in recent years I've come to appreciate the technical side of things. Reading quantitative asset allocation literature, and having had roommates who were elite algo traders, has definitely helped me to see how there are good reasons why technical analysis might make sense. Two Sigma, D.E. Shaw, Renaissance, Tower... these guys make huge profit margins off algorithmic trading, not only for high-frequency stuff, but for longer time frames as well. So the markets are "efficiently inefficient" as Lasse H. Pedersen asserts.
So while I'm not really a technical analysis guy myself, I can appreciate how things like momentum and barrier models might actually work.
quote:
I've not heard of Chinese monies flowing in.
Maybe not. Maybe it's more of a thing for San Francisco, New York, and Canada.
Posted on 3/20/16 at 7:52 pm to Iowa Golfer
quote:
I track aluminum, copper and steel industrial demand, and demand, and don't see these as bottomed out yet.
I don't follow these particular commodities very closely, but I have a bullish hunch on industrial metals, largely based on the intuition that China will get somewhat back to normal later this year.
As for calling the bottom, CRBQ is already up to 32.28, well above its 24.92 trough from January 20. Do you think that index could fall by over 25% this year from its current price, or are you just looking for minor slumps in particular commodities?
This post was edited on 3/20/16 at 8:03 pm
Posted on 3/20/16 at 8:00 pm to Doc Fenton
We'll know when we know. I can't predict any of this stuff with certainty, and I stopped trading per se a long time ago. The only thing I really try to time is entry points. Usually depressed, undervalued asset classes. For example, I'm not interested in buying more real estate. Not the kind I normally buy anyway. Too high right now to oversimplify. I am interested in taking on more exposure to commodities, mostly indirectly, at some point. Not sure when.
Posted on 3/20/16 at 8:27 pm to Doc Fenton
Great write-up, Doc. I've appreciated what you've had to say even before I actually made a TD account (I lurked for at least a year). Your posts are filled with plenty of research and are well-thought out.
FWIW, I am also expecting a drop sometime within the next 18 months. I'm not sure what the cause would be, though: China (per Kyle Bass and George Soros), more troubles in Europe, or some other event. It also seems about time when looking at business cycles - a slump has come around every 7-8 years for a while now. I'm mostly sitting on cash, just making quick trades here and there if I'm confident enough.
Actually, I heard about this a month or two ago on Reddit (either r/stocks or r/investing). Silicon Valley techies were talking about VC money drying up, particularly for the unicorns and/or any company lacking in revenue. From what was said, it seemed that either reality was settling in, the VC's were worried about an economic downturn, or the VC's were worried about the availability of "cheap" money with increased interest rates. Maybe a combination or all three played a part.
FWIW, I am also expecting a drop sometime within the next 18 months. I'm not sure what the cause would be, though: China (per Kyle Bass and George Soros), more troubles in Europe, or some other event. It also seems about time when looking at business cycles - a slump has come around every 7-8 years for a while now. I'm mostly sitting on cash, just making quick trades here and there if I'm confident enough.
quote:
Vanity Fair (3/16/16): " Silicon Valley’s Tech Employees Are Getting Nervous" (Are the so-called unicorns in the SF area about to feel a slump
Actually, I heard about this a month or two ago on Reddit (either r/stocks or r/investing). Silicon Valley techies were talking about VC money drying up, particularly for the unicorns and/or any company lacking in revenue. From what was said, it seemed that either reality was settling in, the VC's were worried about an economic downturn, or the VC's were worried about the availability of "cheap" money with increased interest rates. Maybe a combination or all three played a part.
Posted on 3/20/16 at 8:34 pm to Doc Fenton
(no message)
Posted on 3/20/16 at 8:40 pm to Doc Fenton
quote:
I don't follow these particular commodities very closely, but I have a bullish hunch on industrial metals, largely based on the intuition that China will get somewhat back to normal later this year. As for calling the bottom, CRBQ is already up to 32.28, well above its 24.92 trough from January 20. Do you think that index could fall by over 25% this year from its current price, or are you just looking for minor slumps in particular commodities?
I don't know anything about the index. I've owned X, AA and CTF forever. I also have an inactive interest in a scrap metal operation, so I have some sense about demand for industrial metals. You can't give aluminum away right now. Steel isn't much better. Stainless is different for obvious reasons, but not setting the world on fire either. It really boils down to the strength of the dollar. Some other minutiae as well. But demand is in the equation as well, and China impacts this less than people want to believe.
Posted on 3/20/16 at 9:20 pm to Iowa Golfer
Well CTF is a long/short fund that I don't know well.
U.S. Steel is at 15.76 after hitting a low of 6.15 on January 28. Alcoa is at 10.03 after hitting a low of 6.14 on January 20. They seem to be telling the same story as CRBQ, no?
I understand that weaknesses in Europe or China could cause a flight to the dollar, which would cause dollar-denominated commodity prices to drop. However, if we're only looking at U.S. demand, then it seems that mediocre macroeconomic performance is already baked into the cake. I know some of the links I gave pointed toward recession, but to me, all signs seem to indicate the economy creaking forward at the same 1-2% level of mediocrity.
Now it's possible that a corporate earnings recession could spark a macro recession via the wealth effect, but even so, I don't think it would be enough to where I would want to bet on commodities dropping below their January troughs. I could be wrong though. We'll see.
U.S. Steel is at 15.76 after hitting a low of 6.15 on January 28. Alcoa is at 10.03 after hitting a low of 6.14 on January 20. They seem to be telling the same story as CRBQ, no?
I understand that weaknesses in Europe or China could cause a flight to the dollar, which would cause dollar-denominated commodity prices to drop. However, if we're only looking at U.S. demand, then it seems that mediocre macroeconomic performance is already baked into the cake. I know some of the links I gave pointed toward recession, but to me, all signs seem to indicate the economy creaking forward at the same 1-2% level of mediocrity.
Now it's possible that a corporate earnings recession could spark a macro recession via the wealth effect, but even so, I don't think it would be enough to where I would want to bet on commodities dropping below their January troughs. I could be wrong though. We'll see.
This post was edited on 3/20/16 at 9:24 pm
Posted on 3/20/16 at 9:22 pm to Omada
Thanks. 
Posted on 3/21/16 at 5:32 am to Doc Fenton
(no message)
Posted on 3/21/16 at 5:35 am to Doc Fenton
quote:
U.S. Steel is at 15.76 after hitting a low of 6.15 on January 28. Alcoa is at 10.03 after hitting a low of 6.14 on January 20. They seem to be telling the same story as CRBQ, no?
True. But I don't see significantly increased prices for scrap. Steel and aluminum prices haven't really recovered either. I suppose the equities prices could be a leading indicator, but I wouldn't hang my hat on that.
Posted on 3/21/16 at 6:21 pm to Iowa Golfer
Well true enough. If you look at the profile description of CRBQ on Google ( LINK), it says the following:
Still, it's hard to see why U.S. Steel and Alcoa would rebound so sharply unless commodity futures expectations were also rising.
Going to tradingeconomics.com gives you some interesting charts for steel and aluminum.
Aluminum looks a bit more like what I'd expect. It's trough is in Dec 2015, although in the past couple of weeks it's taken a dive, along with the weakening of the USD.
I'm still bullish on industrial metals. If steel is more than 90% off its 2008 highs, then man, that just seems ridiculous. My main consideration is not commodities though, it's the S&P 500 and my case that we are in the midst of a corporate earnings recession. The global commodities slump was part of my argument for why, and with this thread, I am merely trying to say why my case still holds even though commodities and Chinese equities have likely bottomed.
As you know, I've considered SPXS and put options to take short positions on the S&P 500, but I backed off from doing so. Now, however, I'm looking at the VIX at 13.79, and that's looking very attractive to me right now. There's a significant chance that I might pull the trigger on that within the next week or two.
quote:
The Index is a modified capitalization-weighted, float-adjusted, rules-based index designed to track the overall performance of a global universe of listed companies engaged in the production and distribution of commodities and commodity-related products and services in the sectors, such as agriculture, base/industrial metals, energy and precious metals.
Still, it's hard to see why U.S. Steel and Alcoa would rebound so sharply unless commodity futures expectations were also rising.
Going to tradingeconomics.com gives you some interesting charts for steel and aluminum.
quote:
Steel lost 220 USD/MT or 70.97 percent during the last 12 months from 310 USD/MT in March of 2015. Historically, Steel reached an all time high of 1265 in June of 2008 and a record low of 90 in March of 2016.
Aluminum looks a bit more like what I'd expect. It's trough is in Dec 2015, although in the past couple of weeks it's taken a dive, along with the weakening of the USD.
I'm still bullish on industrial metals. If steel is more than 90% off its 2008 highs, then man, that just seems ridiculous. My main consideration is not commodities though, it's the S&P 500 and my case that we are in the midst of a corporate earnings recession. The global commodities slump was part of my argument for why, and with this thread, I am merely trying to say why my case still holds even though commodities and Chinese equities have likely bottomed.
As you know, I've considered SPXS and put options to take short positions on the S&P 500, but I backed off from doing so. Now, however, I'm looking at the VIX at 13.79, and that's looking very attractive to me right now. There's a significant chance that I might pull the trigger on that within the next week or two.
Posted on 3/21/16 at 6:28 pm to Iowa Golfer
quote:
We'll know when we know.
The great Lawrence Yun spoke on behalf of NAR earlier today: " Existing-Home Sales Fizzle in February."
quote:
Lawrence Yun, NAR chief economist, says existing sales disappointed in February and failed to keep pace with what had been a strong start to the year. "Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest," he said. "The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February's lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers."
As everyone knows, (A) provisional NAR numbers often get revised quite a bit in the following months, and (B) the meat of home data typically occurs in the summer months rather than the winter months.
So to me, a drop in annualized sales from Jan to Feb of 5.47m to 5.08m doesn't mean much. The financial media always tends to highlight the sales volume, but not the prices, but median prices only slipped from $213.7k to $210.7k. Prices always ramp up in summer months, but it remains to be seen whether 2016 will match the $236.3k peak reached in Jun 2015.
Posted on 3/21/16 at 6:50 pm to Doc Fenton
I agree about corporate earnings. I don't connect the dots on this the way you do, mostly becuase you're over my head on some of your stuff.
I've posted about VIX on here a lot. VIX is really a future, and the CBOE VIX options are probably your best bet for ease of trading. Having said this, make sure you understand the settlement, the settlement symbol as this value is very often different from what VIX closes at on settlement day. And VIX goes down very, very quickly. It will be difficult to buy too far out as the pricing is high, partially becuase some insurance premium is built in, partially becuase of time premium, and right now becuase of where the market is at historically. Black–Scholes is probably worthless for VIX. Black-Scholes might be virtually worthless in any event. That comment would cause high blood pressure to some of the economists in the politics thread.
Interestingly enough, Mr. Buffett, who claims derivatives are evil, actually takes advantage of selling naked puts as he, or maybe it was one of his guys, thought that some LEAPS were underpriced. Really, I think he sells naked to lower his entry cost into securities he wouldn't mind owning. But Mr. Buffett isn't the most honest CEO in the world, so who knows what he really does.
Anyway, back to VIX. I found 4 compelling VXX trades this morning. I didn't execute any of them, and due to the nature of the beast, they would have been short term.
For your VIX trade, I guess you can ladder and roll. Maybe not ladder, I'd need to give that a moment's thought. Or you could just go ahead and go out until I think 9/2016, and I'm guessing you'd need to buy DIM calls.
On the future's side, I don't believe there are options. So the contract margin is below $3K for the monthly, and I think you could intraday calendar spread for less. Less risk obviously. You could go out to November on these.
Keep me posted on whatever you decide to do on the VIX calls. I have VIX calls, but mine are entirely for insuring my portfolio.
Lastly, in the oil stocks thread I admitted a huge mistake I made. I had overweight oil exposure, and I had no idea I could have insured the downside with the oil VIX. It's too late to correct that now as OVX is extremely pricey.
I'll make you a bet Doc. I bet next time we have another bull run you'll be insured with VIX calls, and won't find yourself in the position to have to take the majority, or all of your equities down like you did this time.
I've posted about VIX on here a lot. VIX is really a future, and the CBOE VIX options are probably your best bet for ease of trading. Having said this, make sure you understand the settlement, the settlement symbol as this value is very often different from what VIX closes at on settlement day. And VIX goes down very, very quickly. It will be difficult to buy too far out as the pricing is high, partially becuase some insurance premium is built in, partially becuase of time premium, and right now becuase of where the market is at historically. Black–Scholes is probably worthless for VIX. Black-Scholes might be virtually worthless in any event. That comment would cause high blood pressure to some of the economists in the politics thread.
Interestingly enough, Mr. Buffett, who claims derivatives are evil, actually takes advantage of selling naked puts as he, or maybe it was one of his guys, thought that some LEAPS were underpriced. Really, I think he sells naked to lower his entry cost into securities he wouldn't mind owning. But Mr. Buffett isn't the most honest CEO in the world, so who knows what he really does.
Anyway, back to VIX. I found 4 compelling VXX trades this morning. I didn't execute any of them, and due to the nature of the beast, they would have been short term.
For your VIX trade, I guess you can ladder and roll. Maybe not ladder, I'd need to give that a moment's thought. Or you could just go ahead and go out until I think 9/2016, and I'm guessing you'd need to buy DIM calls.
On the future's side, I don't believe there are options. So the contract margin is below $3K for the monthly, and I think you could intraday calendar spread for less. Less risk obviously. You could go out to November on these.
Keep me posted on whatever you decide to do on the VIX calls. I have VIX calls, but mine are entirely for insuring my portfolio.
Lastly, in the oil stocks thread I admitted a huge mistake I made. I had overweight oil exposure, and I had no idea I could have insured the downside with the oil VIX. It's too late to correct that now as OVX is extremely pricey.
I'll make you a bet Doc. I bet next time we have another bull run you'll be insured with VIX calls, and won't find yourself in the position to have to take the majority, or all of your equities down like you did this time.
Posted on 3/21/16 at 6:58 pm to Iowa Golfer
Page 1 of 2
Popular
Back to top
Follow TigerDroppings for LSU Football News