Wednesday 6, July 2022
Oil Price Report Comment
A look at today’s stock market is enough to understand the main concern for oil markets right now, recession. Whilst most assessments expected recession to kick in later this year, its first signs are already emerging with European economies potentially entering a recession in Q3. Seeing Brent futures losing a hefty 10% today and dropping close to $102 per barrel, one would perhaps fail to notice that supply remains very much an issue – Libya’s almost complete degradation into an all-out internecine conflict and Norway’s offshore production seeing the first massive strike campaign of recent years have narrowed potential supply sources even further. Moreover, Saudi Aramco’s August OSPs also point towards little if any remaining spare capacity. Yet all of this is not enough to break the cycle of fear.
From Oilprice.com for Tuesday 5 July.
The NY Fed provides a daily report too, here. It’s awfully dull, but it has some good charts. It explains away the oil price fall by a chart showing a single tick-down in demand that is a bit quicker than the gently declining supply situation. As I say most days, negative real rates my reverse the short-term demand trend. Labour supply is tight too.
Archegos Archwent
This contains a fabulous account of the insanity of the Archegos “family office.” It’s a lot about a lookback option that was implicit in an employment contract. But it’s mainly about the megalomania of Bill Hwang. Someone should definitely make a film about the last days of Archegos.
Crypto
The Economist has run a profile of Sam Bankman-Fried in which it compares him to J P Morgan. Somehow, I don’t think this is accurate. He’s still afloat, but the crypto Ponzi has been fatally wounded. I cannot see it coming back.
Tin-foil hat timeb
Your daily does of conspiracy theory. Rudy is reprising his greatest hits.
It’s interesting that ‘disgraced British Cabinet Minister’ Peter Mandelson was at the East Side townhouse where Sergey Brin was entertained by Epstein.
FAANG Stocks
The NASDAQ finished up yesterday. The conventional narrative is that stocks like Google are immune to recessions. We might cancel a holiday, or buying a new car, because we find ourselves in a recession, but we’re hardly going to cancel our subscription to Google photo storage, are we?
The same goes for cancelling Amazon Prime, or an MS Office subscription. I am not fully convinced. Who really needs the current version of Excel. Most users didn’t use more than 10% of the capabilities of Excel 4. Why should they keep paying for new features they don’t understand and will never use?
Well, I could have written that any time in the last 20 years, so what do I know?
Wrap
FOMC meeting minutes fairly hawkish, according to reports. The implication was (supposedly) that further aggressive hikes are coming. ISM services index dropped modestly in June. The employment index dropped to <50, which supposedly implies contraction, but surely the labour market is still tight in the US? The USD went up. Everything priced in USD went down. In USD terms, of course!
Boris Johnson hanging on by a thread as UK prime minister.
Image
Here is a simple cheat sheet for #gold traders: pic.twitter.com/4OfFVZ7Tdq
— MacroTourist (@Gloeschi) July 5, 2022
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