Oil Market Update

We have some contradictory indications for oil now because its long-term charts look bullish, while it latest COTs and Hedgers charts suggest an imminent reversal to the downside, as do shorter-term charts. Anyone who thinks that this might be an excuse for fence sitting should be aware that we called the exact bottom in oil in November, as the following chart from the last Oil Market update makes plain…

This post was published at Clive Maund on January 01, 2017.

The Almighty Dollar and the Currencies that Crushed it in 2016

A mix of deceptive calm, hair-raising craziness, and big surprises.
Much of the strength of the dollar in 2016 has been ascribed to rising interest rates in the US and minuscule tightening by the Fed – or rather ‘removing accommodation,’ as it likes to say – even as other central banks still engage in QE and negative interest rate absurdities. So the US became a destination for the hot money. By December 20, the dollar reached the highest point since December 2002 against the basket of currencies in the Dollar Index, though it has since eased off somewhat since then.
But the Dollar Index contains only six currencies: euro, yen, pound sterling, Canadian dollar, Swedish krona, and Swiss franc. It doesn’t even include the currencies of two of the four largest US trading partners, Mexico and China.
So how has a broader range of currencies fared against the dollar? Turns out, some soared, others plunged.

This post was published at Wolf Street by Wolf Richter ‘ Jan 1, 2017.

‘Gold has peaked for the year’, revisited

I published a blog post in late-June titled ‘Gold has peaked for the year’. In this post I argued that relative to other commodities (as represented by the Goldman Sachs Spot Commodity Index – GNX) gold’s peak for 2016 most likely happened in February. As evidenced by the following chart, I was correct.
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The reason for this follow-up post is not to give myself a public ‘pat on the back’. I’ve made my share of mistakes in the past and I will make mistakes in the future. The sole reason for this post is the vitriolic response that my earlier article received.
My earlier article should not have been controversial. After all, the February-2016 peak for the gold/GNX ratio wasn’t just any old high, it was an all-time high. In other words, at that time gold was more expensive than it had ever been relative to commodities in general. Furthermore, it is typical for gold to turn upward ahead of the commodity indices and to subsequently relinquish its leadership.

This post was published at GoldSeek on Monday, 2 January 2017.

What Could Go Wrong?

‘Experience is simply the name we give our mistakes.’
– Oscar Wilde
‘Mistakes are the usual bridge between inexperience and wisdom.’
– Phyllis Theroux
‘Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do – and nothing is more unpredictable.’
– Thomas Sowell
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We’ve reached that wonderful time of year when financial pundits pull out their forecaster hats and take a crack at the future. This time the exercise is particularly interesting because we’re at several turning points. Any one of them could remake the entire year overnight. I should probably say up front that I am actually somewhat optimistic about 2017 – optimistic, meaning I think we Muddle Through – but that’s a lot better outcome than I was expecting five months ago. And since my annual forecast has been ‘Muddle Through’ for about six years now (which has been turned out to be the correct forecast), then, given all the speed bumps in front of us, this could be the year where I’m spectacularly wrong. Midcourse corrections may be warranted.

This post was published at Mauldin Economics on DECEMBER 31, 2016.

Trump Hints At “Russian Hacking” Revelations In Coming Days: “I Know Things Other People Don’t”

During a brief, informal exchange with reporters on New Year’s Eve at his Mar-a-Lago estate in Palm Beach, Donald Trump questioned the official version of the “Russians hacking the election”, saying it was possible “somebody else” compromised the Democratic campaign’s servers, adding that he will reveal some previously undisclosed facts in the coming days by hinting that “I also know things that other people don’t know, we they cannot be sure of the situation.”
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Asked what that information included, the Republican President-elect said, “You will find out on Tuesday or Wednesday.” He did not elaborate.
Trump also reiterated his belief that others might be responsible for the cyberattacks: ‘I know a lot about hacking. And hacking is a very hard thing to prove. So it could be somebody else. And I also know things that other people don’t know, and so they cannot be sure of the situation.’

This post was published at Zero Hedge on Jan 1, 2017.

Euronomics Decomposing, Raise a Glass of Cheer!

Europeans must have been delighted to discover that one thing is working as well as it has since the start of the Great Recession. Behemoth banks that are failing are still able to pay their Christmas bonuses to their top executives and give nice dividends to their shareholders thanks to Super Mario Draghi.
Keeping up the tradition of central bankers looking out for other bankers, Mario Draghi, chief of the European Central Bank ‘agreed to lower the minimum capital requirements for Deutsche Bank on Tuesday, ‘giving the lender more leeway to structure bonus payments and dividends.’’ (Zero Hedge).
Thank God for that, huh? The needs of the stockholders and top execs have been taken care of before one of the world’s oldest megabanks falls on everyone else. While Deutsche Bank’s stocks sit at all-time lows after it has been required to pay $8 billion in fines, at least the golden parachutes have been neatly folded.

This post was published at GoldSeek on Monday, 2 January 2017.

“Something For Nothing” All-Weather Funds Disappoint In Post-Election Era

Variously marketed as “all-weather”, “all-season”, or “bulletproof”, the so-called “risk-parity” strategies of some of the world’s largest hedge funds have been anything but ‘stable’ since the election as the combination of leverage and bond losses have crushed the gains from an exuberant equity market.
Promise people something for nothing and you are going to attract a lot of attention. Stumble in the process and the critics will be quick to pounce.
As The Wall Street Journal reports, the weeks since the election have been rough for one of the most polarizing investment strategies out there: risk parity.
The strategy – which simply put, involves using diversification – and sometimes borrowed money (leverage) – to find an (historically-optimized) balance between risk and return.
Bridgewater’s variant of this strategy, for example, has historically used borrowed money to invest about $1.50 for each dollar in assets, often putting the leverage in historically less-volatile bonds. The goal is stocklike returns with less volatility.

This post was published at Zero Hedge on Dec 31, 2016.