From Heinz
worldmarket.blogspot.com
Tuesday, September 21, 2004
insider selling, addendum: the bond market
the recent strong rally in bonds and notes has done two things:
1. it has confounded the consensus, and as i have previously mentioned, this consensus simply HAD to be thwarted by the market, on the grounds that it was so widespread and deeply ingrained in both positioning and poll data. and all this in spite of the market just having experienced a medium term, not even particularly large, correction from a multi decade high.
2. in the context of the observations about increasing insider selling of stocks and the propensity of corporations to lately hoard cash, it is an additional confirmation that the economic recovery is unlikely to be sustainable, and that rising commodity prices have failed to ignite aggregate price inflation (which is only natural with year-on-year growth rates in broad money supply declining).
in the very short term, the bond market looks a tad overbought, but i note that so far, the bearish consensus hasn't budged a whole lot. e.g. the Rydex bond ratio has come down to about 16, but that still means that 16 TIMES the amount of money is invested short vs. the amount invested long (2.65 billion vs. 173 million).
in the futures markets, speculators have pared back their huge net short positions considerably, and have actually gone net long the longest maturity (30 year bond).
otherwise small net short positions persist in the remaining maturities, except the 5 year note. interestingly, in 3 month eurodollars, the small speculators hold a fairly large net short position opposite a similarly large net long position in the hands of the big speculators.
so the positioning in the futures has overall become inconclusive, but a cautious attitude prevails. should that give way to more bullish sentiment, the rally could easily be extended further.
ideally the market would correct a little here to relieve the slightly overbought conditions and then resume its climb.
posted by pater tenebrarum at 1:08 PM
crude oil depletion
in the context of the 18 major producing regions where the effect of depletion on production has recently begun to accelerate, here's a brief comment i found:
quote (unfortunately could not locate the source, so no link):
"The world is now losing more than a million barrels of oil a day to depletion - twice the rate of two years ago - according to a new analysis published this month in Petroleum Review, the oil and gas magazine of the Energy Institute in London.
The analysis shows that output from 18 significant oil-producing countries, accounting for almost 29 percent of total world production, declined by 1.14 million barrels a day ( mb/d ) in 2003. The annual rate of decline also appears to be accelerating, contrary to the widely held view that depletion progresses slowly.
Based on data in the latest BP Statistical Review of World Energy, production from this group of 18 countries peaked in 1997 at 24.7 mb/d and by 2003 it had fallen to 22.1 mb/d. In 1998 their total production dropped by less than one percent, whereas last year it declined by nearly five percent.
"It appears that depletion is now becoming a much more significant, though largely unrecognised, consideration in the supply-demand equation, and may be contributing to the rise in oil prices," said Chris Skrebowski, Editor of Petroleum Review and a Board member of The Oil Depletion Analysis Centre ( ODAC ) , who prepared the new analysis. "
end quote
in other words, there are strong fundamental reasons for the rising price of crude oil. not only has demand been woefully underestimated by most experts, but supply is becoming an increasingly worrisome factor. therefore, the contention that such-and-such amount of the oil price represent a 'terror premium' is a shaky proposition. of course the market is a bit unnerved by the ramifications of a potential terrorist attack on major oil infrastructure in e.g. Saudi Arabia. but there is clearly much more to the current pricing than that.
posted by pater tenebrarum at 1:06 PM |
