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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (5890)	3/27/2002 12:08:27 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Hawk, also the recent back up in rates has done some of the FED's job. the Fed's McDonough, said the USD is somewhat overvalued today.... very interesting. -------------------- Traders cited remarks by Federal Reserve Bank of Dallas President Robert McTeer and early afternoon comments by Federal Reserve Governor Mark Olson as key catalysts for gains in Treasurys. That was especially the case in shorter maturities, which are the most responsive to changes in expectations about the outlook for Fed policy. Speaking in Prague, Mr. McTeer answered a question on interest-rate expectations by saying, "A combination of rapid productivity growth and a slack economy is not a recipe for inflation. So, we may have some time." Meanwhile, in prepared remarks given at Florida A&M University in Tallahassee, Fla., Mr. Olson said, "Uncertainty about the strength of the economy is considerable." Another official who also spoke, Federal Reserve Bank of New York President William McDonough, said that although the economy appears poised to do better, "not all indicators are flashing green." ------------------- 08:18 ET 10-year: +7/32..5.374%....GNMAs: unch....$-¥: 133.16 McTeer's comments earlier with regard to rate hikes, and his opinion that they do not have to come soon fit in nicely with the conversation that we had with a balanced fund manager. That is, the recent backup in rates effectively did some of the work for the Fed. Remember, the Fed's tool, overnight rates, does not effect the term structure of rates (ie the yield curve), the market does. And to this end, recent sentiment from that Fed has led the market to price in a hike down the road by selling Treasuries and raising rates. And, while long term rates have risen only modestly since the beginning of the year, short term rates have skyrocketed in comparison, serving to flatten the yield curve. -------------- 08:30 ET 10-year: +12/32..5.355%....GNMAs: unch....$-¥: 133.22 While it has taken favorable comments from the Fed's McTeer this morning to put a bid under the Treasury market, there may be a bit more going on behind the scenes. Of interest, some of our favorite coincident reflation indicators have begun to lose momentum. As we mentioned yesterday, the rally in the JoC seems to have been thwarted by the 50% retracement level of last year's decline. In addition, the Korean won recently fell to two-month lows despite hints of optimism surrounding the once-dismal prospects for a rebound in capital spending. The Australian dollar has also lost some ground over the last few days, while copper is bumping up against trendline support from early November. Not surprisingly, some of the recent sluggishness seems to be a function of our medium to longer-term quality of recovery concerns surrounding the lack of any broad-based improvement in final demand. --------------- 08:56 ET 10-year: +14/32..5.345%....GNMAs: +10/32....$-¥: 133.00 NY Fed Pres McDonough out with comments at the NABE conference that lean somewhat to the bond bullish side of things, and are likely adding support to todays strength. In calling the economy "slack" he says that not all signs point to recovery, and that capital spending remains mired in weakness. Also mentioned was his thought that it will take some time to recover all the jobs lost in the economic downturn. And, adding more fuel the lack-of-inflation fire, he cites the strong dollar as keeping price pressures at bay. ----------------- 09:25 ET 10-year: +14/32..5.347%....GNMAs: +9/32....$-¥: 132.46....Euro-$: 0.8785 Somewhat interesting that McDonough commented on the value of the dollar. Usually, the Fed tries to stay away from the foreign exchange market. Of course, subtle hints that somewhat of a dollar correction would be welcome do fit nicely with thoughts that the decision to implement steel tariffs was partly a function of the strength of the dollar. Remember, expectations surrounding any adjustment of the US strong dollar policy could weigh on Treasuries as foreign investors will demand higher yields to offset the potential for currency risk. Short-term traders may want to take a look at some of the larger multinationals when the stock market opens in the next few minutes. 09:15 ET 10-year: +16/32..5.338%....GNMAs: +5/32....$-¥: 132.42....Euro-$: 0.8714 Despite some semblance of a lag, the dollar has finally weakened on the back of comments from the Fed's McDonough, who said that the greenback is a bit overvalued. Dollar/yen is now down almost a full figure on the session, while the euro has moved back to the unchanged level.

To: Hawkmoon who wrote (5890)	4/9/2002 11:46:29 AM
From: John Pitera	Respond to of 33421

Nice stats here ----- Drilling Deeper Into the Iraqi Oil Embargo By Tony Crescenzi Special to TheStreet.com 04/08/2002 05:01 PM EDT URL: thestreet.com Iraq's use of oil as a weapon against the U.S. and its effect on the financial markets serve as reminders of just how much the world depends on oil from the Middle East. With its export stoppage, Iraq ostensibly hopes to disrupt the supply of oil, thereby raising its price. The ultimate success of that strategy rests almost entirely on a broadening of the embargo. Fortunately, there are no indications of that possibility happening. Despite the lack of an immediate threat to the U.S. and to the global economy, Iraq's move necessitates a closer look at the particulars of energy usage in the U.S. Below are the major points, followed by frequently asked questions on the subject. All of the information was obtained from U.S. government sources. As a share of gross domestic product, U.S. consumption of crude oil is much smaller today than it was in the 1970s, when two major oil shocks spurred economic recessions. Global reserves of crude oil are significantly higher than they were in the 1970s, when reserves were first established. While the U.S. imports more crude oil today than it did in the 1970s, the U.S. gets a smaller percentage of its oil imports from the Organization of Petroleum Exporting Countries, better known as OPEC. Frequently Asked Questions How much crude oil does Iraq produce, and how much does it export daily? Iraq produced an average of 2.45 million barrels a day in 2001, with exports averaging roughly 2.0 million barrels a day. In 2002 Iraq has exported roughly 1.5 million barrels a day. How much crude oil does the U.S. import from Iraq? The U.S. imported an average of roughly 778,000 barrels a day from Iraq in 2001. How does Iraq export its oil? Recently, about 75% of all Iraqi exports went through the port of Mina al-Bakr, with the rest of it flowing through the Iraq-Turkey pipeline, which was said to stop flowing at 6 a.m. ET Monday. Al-Bakr is used largely for exporting to Asia. Iraqi oil is commonly sold initially to Russian firms, with other large producers including Italian, Malaysian, French and Chinese firms. The oil is then resold to a variety of companies, including ExxonMobil (XOM:NYSE - news - commentary) , ChevronTexaco (CVX:NYSE - news - commentary) , Citgo, BP (BP:NYSE ADR - news - commentary) , Marathon (MRO:NYSE - news - commentary) and Coastal. How much oil is produced in the world daily? Global production of crude oil is roughly 74 million barrels a day. How much capacity is there in the world to produce oil? The estimated production capacity for oil worldwide is 80.2 million barrels a day. That means that there's now about 6 million barrels of spare capacity in the world. Of those 6 million, roughly 5 million of the spare capacity is in OPEC countries. About 60% of OPEC's spare capacity is in Saudi Arabia. How much oil does the U.S. consume daily? The U.S. consumes roughly 19.5 million barrels* a day.* How much oil does the U.S. import daily? The U.S. imports roughly 11 million barrels a day. How much of U.S. imports are from OPEC? The U.S. imports roughly 5.2 million barrels a day from OPEC. As a share of total U.S. consumption, how does the U.S. import of oil from OPEC compare with levels seen in the 1970s? In other words, how dependent on OPEC oil is the U.S. today compared with the 1970s? In 1977, 33.6% of U.S. oil imports were from OPEC. Today roughly 26% of U.S. oil imports are from OPEC. How much oil does the U.S. import daily from Saudi Arabia? The U.S. imports roughly 1.6 million barrels a day from Saudi Arabia. Oil revenue represents roughly 90% to 95% of total Saudi export earnings, underscoring that country's dependence on oil for revenue. How much oil does Iran produce, and how important is oil in Iran's economy? Iran produces roughly 3.6 million barrels a day. Oil revenue accounts for about 80% of all export earnings in Iran and 40% to 50% of its government budget. What is energy's share of the U.S. economy? Today, energy expenditures constitute just 7% of the U.S. economy, compared with about 14% in 1980. Crude oil and crude oil products make up about 3% of the economy, compared with about 8% in 1980. How much crude oil is held in reserve in the U.S. and abroad? The U.S. holds 561.4 million barrels of crude oil in its Strategic Petroleum Reserve. That amounts to 53 days of inventory protection. There are an additional 30 days of inventories held by private companies. Countries in the Organization for Economic Cooperation and Development, or OECD, hold a total of 1 billion barrels of oil in strategic reserves. How much crude oil does the U.S. military consume? Worldwide, the U.S. military's consumption of petroleum amounts to roughly 1.6% of total U.S. domestic consumption. Would rising oil prices stoke inflation in the way it did in the 1970s? The runaway inflation of the late 1970s helped the Federal Reserve to recognize that, to avoid a spillover of inflation in crude oil to other goods, it must avoid monetizing the rise in crude oil prices. In other words, the Fed now knows it can reduce the upward pressure on other goods by limiting the amount of money available in the financial system. So, if an extra dollar gets spent on crude oil, that would reduce the demand for other goods by a dollar, thereby creating a disinflationary influence for other goods. -------------------------------------------------------------------------------- Through the years, key policy decisions have helped to reduce both the likelihood and the potential damages of an oil embargo. Our close ties with Saudi Arabia and the establishment of the Strategic Petroleum Reserve are two examples. New drilling in the Arctic National Wildlife Refuge and greater cooperation with non-OPEC states such as Russia could reduce these risks further. Meaningful shock absorbers are in place, and given the economics of the situation, OPEC won't likely join Iraq's embargo. Nonetheless, the situation in the Middle East is probably the single biggest threat to the U.S. economic expansion.