Barclays Cuts Oil-Price Forecasts on World Supply Surplus – Bloomberg 10-28-14

Salient to Investors:

Miswin Mahesh and Michael Cohen at Barclays said:

  • OPEC will not cut supplies sufficiently to overcome a lackluster demand picture half1 2015 – Brent will average $93 and WTI will average $85 in 2015.
  • Oil has reached its lowest point for 2014 but will recover modestly during Q4 as the oversupply temporarily diminishes.
  • The supply glut will accumulate again in 2015 amid booming US shale output.
  • Brent will drop to $89 and WTI will drop to $81 in Q4 2014, but Brent will rebound in half2, 2015 to above $100.

Jeffrey Currie et al at Goldman Sachs cut 2015 oil forecasts, saying OPEC is losing its pricing power – Brent will average $85 and WTI $75 in Q1 2105.

Read the full article at http://www.bloomberg.com/news/2014-10-28/barclays-cuts-oil-price-forecasts-on-world-supply-surplus.html

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Mercedes Drivers Stung by Shale Boom’s Quirks at the Pump – Bloomberg 10-28-14

Salient to Investors:

  • The price gap between regular and premium gasoline is at the widest since 2008, caused partly by the supply of shale oil, which is more easily turned into low-octane gasoline. John Auers at Turner Mason said foreign oils produce high-octane fuel better.
  • Patrick DeHaan at GasBuddy Organization said that at current oil prices, the average cost for retail gasoline in the US will drop below $3 within two weeks.
  • Michael Green at AAA said gas stations are more focused on being competitive with regular prices which comprise the bulk of sales – EIA says premium fuel is only 10% of US sales.
  • JBC Energy said that as maintenance work at refineries ends, the price gap should return to normal.

Read the full article at http://www.bloomberg.com/news/2014-10-27/mercedes-drivers-stung-by-shale-boom-s-quirks-at-the-pump.html

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Barclays Says Stock Bulls Confuse Correlation With Cause – Bloomberg 10-28-14

Salient to Investors:

Jonathan Glionna at Barclays said:

  • There is insufficient data not enough data – only 21 observations in the last 86 years – to expect a repeat of stocks’ habit of rallying after midterm elections – a median 7% in the 90 days following, with a range of -10% to +20% and positive returns 86% of the time.
  • The midterm results on November 4 will not cause market volatility, A Republican-controlled Congress is unlikely to enact near-term changes that will affect the equity market’s direction, while market reaction to Democrat control of the Senate would still be muted.
  • The S&P 500 will end 2014 little changed at 1,975.

The average of 19 strategists predicts the S&P 500 to end 2014 at 2,050.

Read the full article at http://www.bloomberg.com/news/2014-10-28/barclays-says-stock-bulls-confuse-correlation-with-cause.html

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U.S. Banks See Worst Outflow of Money in ETF Since 2009 – Bloomberg 10-27-14

Salient to Investors:

  • The flow of funds into the Financial Select Sector SPDR ETF turned negative for the year following its biggest withdrawal last week since 2009.  Its short position is the highest since June 2002
  • Todd Rosenbluth at S&P Capital IQ said investors should have less exposure to financials than the broader market because of poor prospects for interest rates.
  • Charles Peabody at Portales Partners said the upside for financials is taken away if the Fed keeps rates low, and we have moved to bad volatility, which makes tougher. Peabody said the jump in mergers and acquisitions has probably peaked.

Read the full article at http://www.bloomberg.com/news/2014-10-27/u-s-banks-see-worst-outflow-of-money-in-etf-since-2009.html

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Fareed Zakaria GPS – CNN 10-26-14

Salient to Investors:

Fareed Zakaria said:

  • Canada has more immigrants, more foreign-born citizens than the US.
  • Since 1990, mortality rates of children under five have been cut in half.
  • Most books on entrepreneurship are useless.
  • The top 5 countries that account for half of the under-5 deaths are India, Nigeria, Pakistan, the Democratic Republic of Congo and China.
  • Edward Snowden did the US a service but needs to return for trial to transform his acts of theft into civil disobedience.

Sean Wilentz at Princeton said:

  • Obama has done a good job.
  • The mid-term election is being fought in the Border States and the Deep South, so the Republicans will win the Senate.

 

Gloria Borger at CNN said Obama has not communicated well, and less than 50% of Americans believes he is a strong leader.

Walter Isaacson at the Aspen Institute  said:

  • Obama’s stewardship of the economy has been very good.
  • The US has recovered far better than any other part of the world.
  • Obamacare makes for a much better economy because you have much more fluidity in the work force.
  • Usually when the economy is getting better, and most importantly, when gasoline prices are falling, that is usually the best indicator of who is going to vote for the incumbent party.

Amity Shlaes said Obama said:

  • Obama is like Woodrow Wilson and Coolidge in that he retreats into himself when the world does not go the way he thought it would.
  • The US economic recovery is poor relative to past recoveries because of the regulatory state now established. For example, Dodd-Frank institutionalized too big to fail in a creepy way – you fall into the rescue class or you don’t.
  • Banks are supposed to lend, but do not always with a nominal interest rate.
  • Smaller businesses are especially hit by complying with new regulation.
  • The bill for healthcare is yet to come, which will be nominally free, but unavailable.
  • Regulation is putting pressure on the median wage, and people are well aware that if interest rates rise, the picture will become deeply difficult and chaotic.

Bernard Kouchner said every country listens to every other country but does not have the same means as the US , which makes them jealous.

Walter Mischel said:

  • Self-control is a predictor of success in life and a fundamental key skill that enables self-control is being able to keep a delayed goal in mind.
  • Delayed gratification ability can be taught and enhanced and is not genetic.
  • Identification of one’s vulnerabilities is hugely important.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1410/26/fzgps.01.html

Why the Stock Market Rally Is Bad News – Bloomberg 10-22-14

Salient to Investors:

  • Regular investors, especially those saving for retirement, have an advantage over the professionals because they can afford to be patient and buy extra when stocks drop – “Be fearful when others are greedy, and greedy when others are fearful” – Warren Buffett.
  • David Santschi at TrimTabs Investment Research said that did not seem to care much when stocks started to drop this month.
  • Stock declines do not always predict a recession but a strong stock market is a sign the economic recovery may still be on track.

Read the full article at http://www.bloomberg.com/news/2014-10-22/why-the-stock-market-rally-is-bad-news.html

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All the Markets Need Is $200 Billion a Quarter From the Central Bankers – Bloomberg 10-21-14

Salient to Investors:

  • Investors still believe that whenever stocks and risk assets fall, the authorities will act to limit the losses to ensure they don’t take economies down with them.
  • Hans Redeker et al at Morgan Stanley said comments last week by Bullard and Haldane left markets with the impression that the ‘central-bank put’ is still in place.
  • Matt King et al at Citigroup estimate that zero stimulus would be consistent with a 10% quarterly drop in equities, so say it takes $200 billion from central banks each quarter to keep markets from selling off. King said the markets’ drops owe more to an almost belated reaction to a temporary lull in central bank stimulus than to any reduction in the effect of that stimulus in propping up asset prices.
  • Bank of America Merrill Lynch said another 10% decline in US stocks might spark speculation of a fourth round of QE. The Fed acted similarly following the equity declines of 11% in 2010 and 16% in 2011.
  • Citigroup said the ECB and BoJ stimulus in coming months will more than compensate for the Fed withdrawing QE as they fear a prolonged sell-off in markets would upend the fragile economic outlook – central banks are much more concerned about recession than asset-price bubbles so have little choice but to step back in.

Read the full article at http://www.bloomberg.com/news/2014-10-21/how-markets-need-200-billion-each-quarter-from-central-bankers.html

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Oil at $80 a Barrel Muffles Forecasts for U.S. Shale Boom – Bloomberg 10-21-14

Salient to Investors:

  • Bob Brackett at Sanford C. Bernstein said oil at $79.78 a barrel renders one-third of US shale oil production uneconomic. Bernstein said the price will rise to a level where more output is economic.
  • Vikas Dwivedi at Macquarie said any slower increase in US output would reshape the way everybody would think about oil, while new wells have to generate 1.8 million barrels a day each year to keep production steady.  Dwivedi said at $75 a barrel, growth would fall 56%, and closer to $70 a barrel, growth would drop to zero.
  • ITG said at $80 a barrel, output would grow by only 5%.
  • The IEA says oil production from shale drilling declines more than 80% over 4 years, over 3 times faster than conventional wells.
  • Philip Verleger at PKVerleger said oil at $70 a barrel could cut Bakken production by 28% to 800,000 barrels a day by February from the 1.1 million barrels a day pumped in July. Verleger said cash flow will drop as oil prices drop, while the funds to continue drilling will dry up entirely, resulting in a marked slowdown in drilling.
  • Eric Lee at Citigroup said the flood of oil from shale will put a ceiling of $90 a barrel on prices through the latter half of this decade, with the price at times dipping to as low as $70.
  • Bank of America sees a risk of a brief drop to $75 a barrel before global demand recovers in 2015, and predicts an average price of $85 in Q4.
  • Short positions on WTI is the highest in 22 months.
  • Amy Myers Jaffe at the University of California-Davis said shale drillers expanded production of natural gas even after prices collapsed.
  • Bill Kroger at Baker Botts said the companies that got in early and have low costs and already built the infrastructure will to continue to execute on their strategies.
  • Shane Fildes at BMO Capital Markets said companies that can profit at $80 a barrel may still curb their budgets as returns shrink.
  • Paul Sankey at Wolfe Research expects a supply response more quickly than some expect, and predicts a drop in completed wells in the major basins within a couple of months.

Read the full article at http://www.bloomberg.com/news/2014-10-21/oil-at-80-a-barrel-muffles-forecasts-for-u-s-shale-boom.html

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China to Let World in on Gauge Showing State of Economy – Bloomberg 10-21-14

Salient to Investors:

  • Zhu Haibin at JPMorgan Chase said the lack of good unemployment data is the main reason why China still focuses so much on GDP, and since China is more concerned about employment and inflation, it refrains from big stimulus. Zhu said China’s current registered unemployment rate is untrustworthy and unusable.
  • Ding Shuang at Citigroup said all eyes will be on the new surveyed unemployment rate, which will be as important as it is in the US. Ding said a monthly jobless rate could be a real economic barometer because GDP data is only released quarterly and because the direct survey minimizes distortions by local officials to glorify their performance.

Read the full article at http://www.bloomberg.com/news/2014-10-21/china-to-let-world-in-on-gauge-showing-state-of-economy.html

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Sales of U.S. Existing Homes Rise to One-Year High – Bloomberg 10-21-14

Salient to Investors:

  • Cash transactions accounted for 24% versus 33% a year ago. Investors, 63% of whom paid cash, were 14% of the market last month versus 19% in September 2013. Foreclosures and short sales were 10% of the total. First-time buyers accounted for 29% versus the historical average of 40%.
  • The average 30-yr, fixed-rate mortgage is at the lowest since June 2013.
  • Brittany Baumann at Credit Agricole sees upward trajectory over the next few months, but said it will take further strengthening in the job market, low mortgage rates, and a special importance on easing of mortgage lending standards.
  • Lawrence Yun at NAR said the market a year from now, 2 years from now, will be better, and the share of first-time buyers will steadily increase with an improving economy and job creation.
  • Robert Stein at First Trust Portfolios said the traditional buyer will continue to grow in strength.
  • Chris Rupkey at Bank of Tokyo-Mitsubishi UJF said unemployment is plummeting in many formerly problem states as the recovery spreads – California and Nevada, most hurt by the meltdown in residential real estate, have had the biggest declines in joblessness over the past year.

Read the full article at http://www.bloomberg.com/news/2014-10-21/sales-of-existing-u-s-homes-rose-in-september-to-one-year-high.html

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