Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Volatility in energy markets is attracting an ocean of hedge fund and other investment capital in another sign of too much money chasing too few global investment opportunities:
"The money keeps piling into oil, with hedge funds, buyout firms and asset managers rushing to claim a spot at the table. "There is just so much money," said [Jeffries Group Investment banker Joseph Gladbach], who noted that more than $100-billion (U.S.) has been raised and set aside for energy investments by the likes of Blackstone Group LP and Carlyle Group LP.
Many of the investors are newcomers to the industry, drawn by the hope of turning a quick profit on market fluctuations."
"Investors Who See 'Froth' in Market Go All In for Oil" – Bloomberg
"Hedge Funds are the most bullish on #oil in 8 months..." – Mark Barton, Twitter
See Also: "Excess cash chasing limited investments points to potential instability" – Barlow, ROB Insight
Also in energy-related news Monday, Bloomberg provides an excellent overview on declining oil demand resulting from auto efficiencies and electric vehicles,
"Through the economic boom, the financial crisis, and the recovery now underway, [oil] demand peaked in 2004 and has fallen ever since… Electric vehicles are starting to take off, with global sales of 288,500 units last year, according to BNEF research. While that's just 0.5 per cent of all car sales, it's more than five times the number in 2011, and manufacturers are preparing for more."
"Big Oil Is About to Lose Control of the Auto Industry" – Bloomberg
The People's Bank of China reduced bank reserve requirements by 100 basis points over the weekend but the markets that would most benefit from the added liquidity – estimated at $200-billion (U.S.) – are greeting the news with a shrug.
The market ambivalence, which is most visible in Hong Kong equities and copper markets, is caused by other measures the government put in place to reduce leverage and margin credit available to Chinese equity investors. Policy makers are clearly stickhandling – attempting to slow credit in some areas and maintain growth levels in the broader economy.
"A policy put and a call in China?" – Keohane, FT Alphaville
"China makes big cut in bank reserve requirement to fight slowdown" – Reuters
"China Stocks Drop on Record Turnover as Margin Curbs Trump PBOC" – Bloomberg
"China allows fund managers to lend stocks for short-selling" – Reuters
"Hong Kong Stocks Slump on PBOC Move" – Wall Street Journal
European investors must be suffering from some degree of shellshock as the imminent disaster of an EU breakup is constantly avoided at the last minute. This week, the anxiety is particularly acute as the Greek government reportedly scrambles to find funds to pay public servants while considering defaulting on a debt payment to the IMF.
Societe generale analyst Michala Marcussen's pessimism on reaching a Greece/Europe deal is evident in a research report cited by Buiness Insider:
"Reaching [a deal] would require that Greece firmly commit to no rolling back of labour markets reforms and engage a deficit reducing pension reform. To secure a full payout, Greece must meet the IMF's specific structural benchmarks, including product and service reforms and the full privatization program."
Yet Greek official remain intransigent on these issues by all accounts, with the country's deputy Prime Minister vowing they would not budge on recent measures to stop privatization and increase wages.
"Greece is going to miss its own bailout deadline and the money is rapidly running out" – Business Insider
"Greek bond sell off deepens as debt drama unfolds" – FastFT
Tweet of the Day: "@jenanmoussa This is incredible --> @peterkinvara the black camels are shadows, white figures are the actual camels. #SaudiArabia http://t.co/rTAUmoIyOV
Diversion: "Nice Downtowns: How Did They Get That Way?" – The Atlantic
Scott Barlow