A colorful and informative article by John Dizard in the Financial Times on how emerging markets may not have dodged foreign currency exposure risk despite their central banks having very large foreign exchange reserves. It turns out their banks and major companies weren’t so prudent. Dizard raises a second issue here, one that was discussed […]
Read more...What a difference six months makes. When we questioned the thesis that the oil price runup earlier in the year was due solely to supply and demand, we got a fair number of hostile comments (see here and here for some of many examples). And now the view that oil will keep falling has also […]
Read more...The collapse in the Baltic Dry Index continues. As we have noted before, the inability of cargo shippers to secure letters of credit (and the unwillingness of banks to accept L/Cs from other banks) is play a significant role in the plunge in trade transport. From the Financial Times: The cost of shipping bulk commodities […]
Read more...Now that deflation worries are upon us, even the mainstream media is taking note of the reversal of the commodities price surge of earlier this year. Below are some excerpts from a New York Times article, “Commodity Prices Tumble.” But first, this tidbit, courtesy reader Michael, from an Oppenheimer report, dated October 13, “Surviving Lower […]
Read more...In yet another sign reluctance to suffer counterparty risk, banks that only recently were aggressive in booking lucrative over the counter derivative trades are now tripping head over heels to shift them on to exchanges (note that the exchange, rather than the bank, would then monitor counterparty performance and be responsible for making margin calls […]
Read more...Reader Michael forwarded a new research piece from Oppenheimer by Fadel Gheit and Daniel Katzenberg that makes the case that oil prices will continue to decline. A core element of their thesis is that OPEC will not defend prices above $60. Here are the main arguments (boldface theirs): Given the bleak global economic outlook, we […]
Read more...Russia’s stock market took a beating as foreigners started getting cold feet over the British Petroleum row, when a consortium of oligarchs engaged in a power and money grab over a Moscow-based development joint venture, TNK. But falling oil prices are also a bad harbinger for a resource-dependent economy. From Bloomberg: Russia’s stock market collapse […]
Read more...I must confess a certain fondness for the apocalyptic sort of financial writer, provided they don’t lose anchoring with reality and fall into the tinfoil hat category. Nouriel Roubini is the case example of an economist who favors a baroque, melodramatic style, and despite sounding more than a tad unhinged at points, he has proven […]
Read more...Venezuela has lots of oil, but it is heavy and sulphurous, which means it is costly to refine and is not terribly viable uniess oil prices remain high for a sustained period (refinery capacity is now skewed towards the sweet, light grades). That’s why Venezula, along with Iran, is the most aggressive among OPEC members […]
Read more...As the recession takes hold and increasingly looks to be a nasty affair, analysts are quickly revising forecasts to levels that would have seemed barmy a mere month ago. The latest is a new Merrill call that oil could drop to $50 a barrel, although the report waffles hugely by deeming a global recession “unlikely”. […]
Read more...Demand for gold continues to increase as the rich start to accumulate the metal itself. Nevertheless, the problem with gold as a store of value is twofold. First, for Americans, the US required citizens to turn in gold (presumably coins and bars) in 1933, and they were given paper money at a not-great exchange rate. […]
Read more...The Baltic Dry Index, which measures international shipping rates, is seen as a rough proxy for global growth. But like a negative yield curve, falls in the Baltic Dry Index have as often as not proven to be false positives. However, the BDI has taken a dramatic turn south, and in combination with weakening economic […]
Read more...It appears no sector of the economy is immune from the credit crunch. The Wall Street Journal reported over the weekend that luxury goods and services are taking a hit (a slowdown in plastic surgery, quelle horreur!). Natural gas producers are also seeing the impact. From Platts (hat tip reader Michael): Chesapeake Energy CEO Aubrey […]
Read more...So much for the thesis that China’s oil imports would rise relentlessly, which by implication said they would be immune to the advanced economy slowdown. Sinopec, the largest refiner in China, is reducing its oil imports. But oil has bounced up and is now trading at over $100 a barrel. So much for the theory […]
Read more...While Goldman, the firm that called for a “super spike” of oil prices this year to $150-$200 a barrel, has now reduced its forecast considerably, it still calls for oil prices significantly above their current level ($92 for Brent as of this writing) before year end. From Bloomberg: Goldman Sachs Group Inc. slashed its forecast […]
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