An oil pump jack pumps oil in a field near Calgary, Alberta, July 21, 2014.Todd Korol/Reuters
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Finance blog Climateer Investing has noticed a promising "permabid" in the commodity space,
"The buying has been relentless. Not aggressive but each day taking what hits the bid and then upping the bid. And it's not just agricultural commods ... Benson Quinn Commodities, for instance, saying that gains in soybean prices 'seemed to be more macro in nature,' flagged signs of 'funds coming to the commodity sector as signs of rising US inflation along with China hitting its growth target in third quarter reporting GDP of 6.7%'. The CRB commodities index closed the last session above 190 points for the first time in more than three months."
"If You've Noticed A Perma-Bid In Commodities, You're Not Imagining It" – Climateer
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For the energy space specifically, things are a bit more confusing.
There is a widely held view that the oil glut will end in 2017 – demand and supply will balance globally – and crude prices will march steadily higher. Bloomberg's Javier Blas ( a must-follow on Twitter for anyone interest in oil markets by the way) noted that however, futures markets show no sign of this optimism as longer dated futures are falling in price. On the other hand, the Financial Times explores the possibility of crude prices heading back to $100 per barrel,
"Spot, or immediate, prices are hard to model … [but] Oil due for delivery in three to five years is easier to gauge. This should approximate the marginal cost of production for a given level of future global consumption … In the U.S., shale companies have focused on their most productive areas, increasing rig density and extraction pressure to pull forward future production. In OPEC, Iraq has surged production and Gulf nations have tapped into their spare capacity. Essential maintenance has been deferred, as can be seen in rising North Sea production. Supply is approaching a "Wile E. Coyote" moment, particularly in the US, where production could fall by 1 mbpd versus expectations into the next year as lower drilling and spending catches up with the market."
"@JavierBlas2 #Oil Watch: lots of talk of market re-balancing, but #Brent time-spreads signal the opposite (here M2-M3 spread, weakest since March)" – (chart) Twitter
"How oil can get back to triple digits by 2017" – Financial Times
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Businessweek attempts to uncover where the next global market crisis will originate,
"Risks that aren't acute can build for a while before triggering a crisis. What's indisputable is that debt, the tinder of almost every financial conflagration, is growing rapidly. At 225 percent of world gross domestic product, combined public and private debt outside the financial sector 'is currently at an all-time high,' the IMF says…Chinese banks are 'the major risk, a potential detonator,' says Samuel Malone, director of specialized modeling at Moody's Analytics. He looked at the size, fragility, and interconnectedness of the world's biggest banks and concluded that China's Southeast Asian neighbors, particularly Singapore, are most directly exposed."
"Where the Next Crisis Will Come From" – Businessweek
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An inflationary 2017 is becoming the consensus economic forecast as FT Alphaville details,
"From tech billionaires going around recommending loss-leading tech companies finally start raising prices and Spotify looking to restrict free streaming, *something* seems to be happening. And then we go this invite from Lombard Street's Dario Perkins in today's email splurge: 'Please join Dario Perkins for a conference call at 15:00 (UK time) on Wednesday 26th October where he will answer questions on major macro drivers such as Will inflation taken over from deflation in 2017? , Could we see another taper tantrum in bond markets, or worse a repeat of 1994? Can central banks do anything to manage these risks (e.g. Japanese-style yield targeting) · How vulnerable are asset prices to rising yields?'"
As I've written previously, "inflation or no inflation" is the biggest, most important portfolio strategy call for 2017.
"Have we crossed the inflation Rubicon?" – FT Alphaville
"A bold Merrill Lynch forecast to give income investors pause" – Barlow, Inside the Market (Oct. 17, 2016)
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Tweet of the Day: " @RBAdvisors [U.S. leading economic indicators] continues recovery suggesting the wait for Armageddon might be a long one." – Twitter
Diversion: "Would Progressive Economics Win Over Trump's White Working Class Voters?" – Medium
Scott Barlow