Its beginning to look a lot like rate hikes, everywhere you go!
Look at the five and ten’s, yields rising once again as Fannie Mae and banks arrange more loans.
It's beginning to look a lot like Fed Day! Traders on the floor. And they all pretty much agree that it will be higher rates that we will see, and we will see more.
Wages and growth and economic green shoots were the wishes of Janet and Ben. Now it is Powell that will do the walk and the talk and raise the rates again, and Donald Trump wants to make America great again. It beginning to look like rates hike, stocks are off the chart. And the thing that is making them swing is the tax cuts that will be as the economy jump starts.
This is Janet Yellen’s swan song and in a way, an interest rate increase for her is considered a victory. The dovish Fed Chair finished the job that Ben Bernanke started and despite a lot of criticism seemed to hold her own in a crazy political world. President Donald Trump was backed into a corner to replace after heavily criticizing her during the campaign but replaced her with William Powell that always voted Janet’s party line. Yet doves or hawks, Powell should have an easier time at the Fed because he does have prescient that gets how the economy works.
You can’t live on monetary policy and government regulation alone. You need a smart fiscal policy. You need to reward small business not penalize them. You need real tax reform. You need for the Government in many ways out of the way. That’s why Ben Bernanke and Janet Yellen deserve some credit! Because they had to do all the heavy lifting n the economy without any help from that last administration and the fiscal side. Good Luck Janet, I think you are leaving with the economy on solid footing.
Still, the real test will be in a few years after we see what type of asset bubbles may have been created by her dovish policies. Stocks are soaring but in a way, they are really catching up with the underperformance we had from one of the weakest recoveries from an economic downturn in history.
The Feds dot plot may add to the volatility that we have seen in the oil market. Dated Brent Crude prices pulled back after soaring on the ongoing shutdown of Forties pipeline that has shut in at least 40% of North Sea production, moves 450,000 barrels per day (bpd) and is the largest out of the five crude oil streams that make up the Brent contract. Royal Dutch Shell and BP have closed down oil fields in the response. The shut-in is going to continue to support prices and the selloff after the spike was really profit taking and offsets of spreads.
Oil also accelerated its sell off before regaining ground on a report from the U.S. Energy Information Administration that said that U.S. crude oil hit a record high 10.02 million barrels of oil a day in 2018! Wait! Where have I heard that before! Over 10 million barrels? Oh yeah! I remember! That was from the EIA last year when we said we would be well over 10 million barrels a day! That did not happen. The reason it did not happen is that they are overestimating shale output and their models are wrong. They need to change the model to include actual data from shale producers and not just assume that every shale well is the same. Unless they correct this the increase in oil production projects should be lowered by a factor of 5 to 10 %.
Opec says they see evidence of the tightening of supply and we are seeing in our oil inventories! Another massive 7.4 million barrels oil supply drop, reported by the American Petroleum Institute last week. That brought oil back up. They also reported that gasoline stocks rose by 2.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.5 million-barrel gain. Distillate fuels stockpiles, which include diesel and heating oil, rose by 1.5 million barrels, compared with expectations for a 902,000-barrel gain. The U.S. government’s Energy Information Administration releases its weekly oil report today.
Bloomberg reports that OPEC is near its goal of rebalancing the oil market as an inventory overhang targeted by its output curbs continues to shrink, according to the group’s secretary general. The stockpile glut -- including crude as well as oil products -- has shrunk to 130 million barrels above the five-year average, Mohammad Barkindo said in Beijing before the release of OPEC’s monthly market report on Wednesday. The group last month estimated the overhang at about 154 million barrels. Say goodbye glut Hello tight market!
Reuters reports The World Bank will no longer finance upstream oil and gas projects after 2019, apart from certain gas projects in the poorest countries in exceptional circumstances, it said on Tuesday, drawing praise from environmental groups.
Nat gas crashed! It’s not cold enough to overcome record production. Still, we are due for an oversold bounce.