Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
There is a lot of cautionary talk about oil demand this morning, including my "Why oil prices are precariously close to another steep fall" in the paper (the text is a lot less dire than the headline by the way). The focus is on refiners, where high gasoline inventories and low profit margin threaten near-term demand for crude.
The most interesting report on the theme might have come earlier this week as Bloomberg implied that the high U.S. demand for gasoline might be a myth,
"When taking the weekly figures, it looks like U.S. gasoline demand is soaring … But the latest monthly data, showing the numbers for April, paint a very different picture … They show U.S. gasoline consumption falling between March and April and imply a downward revision of April demand of 260,000 barrels a day, or 2.7 per cent, from the preliminary figures. That might not seem a lot. But when the same agency forecasts that U.S. gasoline demand will grow overall this year by just 170,000 barrels a day, it's enough to change the whole outlook."
"Is America's Thirst for Oil Just an Illusion?" – Bloomberg Gadfly
"Cruel summer for U.S. refiners as margins tank" – Reuters
"Oil prices rise on U.S. stock draw but economic worries remain" – Reuters
Counterpoint: "UBS upgrades oil price forecast" – FastFT
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The gold rush is on as bullion holdings in global ETFs climbed above 2000 tons on Wednesday. The gold analysts at ABN Amro Group NV, the top-rated forecasters according to Bloomberg, are predicting $1425 (U.S.) per ounce by the end of the third quarter,
"'Gold and silver prices have rallied substantially since the Brexit referendum,' the bank said. 'Safe-haven demand, the market pricing out of Fed rate hikes this year and next year and more BoE and ECB monetary policy easing are the main reasons behind the price rally.'"
"Gold's Most Accurate Forecaster Says Prices May Go to $1,425" – Bloomberg
"Gold Assets Top 2,000 Tons as the Clamor for Havens Grows Louder" – Bloomberg
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Former Bond King Bill Gross fleshed out his dire predictions for credit markets by comparing fixed income to a giant multi-trillion dollar game of monopoly,
"All of these elements are but properties on a larger economic landscape best typified by a Monopoly board. In that game, capitalists travel around the board, buying up properties, paying rent, and importantly passing 'Go' and collecting $200 each and every time. And it's the $200 of cash (which in the economic scheme of things represents new "credit") that is responsible for the ongoing health of our finance-based economy. Without new credit, economic growth moves in reverse and individual player "bankruptcies" become more probable."
In short, Mr. Gross fears credit markets will collapse without constant monetary stimulus.
"Just a Game" – Gross, Janus Capital
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The U.K. real estate sector remains under extreme pressure this morning with investors unable to access over $24-billion U.S. dollars invested in real estate funds. I think, however, that comparing the situation to Lehman Brothers fund collapses in 2007 is overdone,
"U.K. property funds with about 18 billion pounds ($23.4 billion) of assets froze withdrawals as investors sought to dump real estate holdings in the aftermath of Britain's vote to leave the European Union.
"'It's reminiscent of Bear Stearns' subprime funds before the Lehman debacle,'" Bill Gross, a fund manager at Janus Capital Group Inc., said on Bloomberg TV. 'The system doesn't allow liquidity to flow into the proper places. If these property funds are just one indication, perhaps there will be others to follow. I think it's something to worry about.'"
"'Panic' Brexit Withdrawals Freeze $23 Billion Property Funds" – Bloomberg
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Tweet of the Day: "@AlastairJMarsh Gundlach: "Watch Deutsche Bank shares go to single digits and people will start to panic" reut.rs/29mo7rq via @Reuters " – Twitter
Diversion: "Here's Why Stanley Kubrick Was Such a Great Director" – (video) Sploid
Scott Barlow