The Market Radar

We anticipate, monitor, and comment on market moving global economic and geopolitical issues.  No dark side brooding, no wanting the world to end, no political rants.  Traders, investors, policymakers, or market observers can’t  afford to ignore us.

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“Toto, I have a feeling we are not in Kansas anymore” – Global GDP Rankings

Take a look at the change in World GDP rankings since 1980.   Stunning.

The U.S. GDP in purchasing power parity  (PPP) terms, which adjusts for currency valuations,  was 187 percent  larger than Japan, the world’s second largest economy in 1980.   U.S. GDP is now 12.7 percent smaller than China, the world’s largest economy.

Note the U.S. is still ranked numero uno when GDP is measured in nominal terms.

Nominal versus PPP GDP
Here is a decent piece in explaining the differences between nominal and PPP GDP.   Remember, economies are denominated in local currency and when comparing  across countries they must be converted to a common currency, such as the US dollar.   Some currencies can be cheap and where the home country would, say, have cheap Big Macs, and some can be expensive and have expensive Big Macs.

The Economist’s Big Mac Index measures the Chinese currency at about 45% undervalued to the U.S. dollar when purchasing a Big Mac in China.   This partially explains the big differential in China’s nominal dollar GDP versus its GDP in PPP terms.  And, maybe one reason President-elect Trump rails on China as a currency manipulator.  The China currency situation is very complicated now as they are experiencing massive capital flight, putting further downward pressure on the currency and its international reserves.   One reason they have belling U.S. Treasury bill, notes, and bonds.

Relative Growth and Demographics
Also interesting to note that since 1980,  US GDP has grown 643 percent versus Japan’s 395 percent and Germany’s 359 percent.   Not surprising given the relative demographic trends, where Germany and  Japan are among the oldest by median age in the world — tied at 46.5 years old. — second only to the miniscule city-state, Monaco, with a population of 37K and a median age of 51.7 years old — really doesn’t count, in our opinion.

Contrast that to the U.S., which has the 62nd oldest population in the world with a median age of 37.8 years, much, of which, can we say it, ugh, hmm, has to do with immigration.  Demographics are a YUUUGe factor in economic growth.

We also suspect the euro currency distorts and depresses the value of German PPP $ GDP.   If the Germans still had the deutsche mark (which they may again, probably sooner than we all think)  we estimate German PPP GDP would bee 30-40 percent higher,  giving the country’s economy a 520 percent boost from 1980-2016.

global-gdp-rankings

New World
So there you have it, folks, we live in a different neighborhood and world now than when Ronald Reagan was elected and there is no turning back.   Sure,  China could collapse – claptrap we have been hearing for 10 years, BTW – India could stop having babies, and the U.S. will once again be the lone economic superpower,  or whatever.

You know we are a pretty nonpartisan bunch over here and we really hope and pray that President-elect Trump becomes one of greatest Presidents in history, as we would have said the  same for a President Clinton.

Policy Implications
But we can’t help but think this past election was an exercise in Land of Oz, where Dorothy clicked her red ruby shoes together and said,  There is no place home  Make America Great Again.

We’re not going back there, folks,  let’s live and adapt policy to a world as it is,  not as it was, not what we wish it was, or what we hope it should be.   So let’s get on with it.

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COTD: Working Hours To Buy iPhone

The World Economic Forum reports,

How many hours must you work to buy a new iPhone? It varies dramatically around the world, reflecting disparities in productivity and purchasing power.

According to a 2015 report by UBS that aims to measure well-being by estimating how many minutes workers in various countries must work to afford either an iphone, a Big Mac, a kilo of bread or a kilo of rice, the average worker in Zurich or New York can buy an iPhone 6 in under three working days. In Kiev, by contrast, it would take 13 weeks (or 627 hours) to buy the same phone. The report is released every 3 years.

hours_to_buy_iphone

(COTD = Chart of the Day)

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Nattie Fresh!

Take a look at the chart below, which shows a series of CO2 emissions versus Natural Gas’ Share of Electric Power Consumption.    The increase demand for the “clean fossil fuel” versus  burning dirty coal to fire electric plants has a lot to do with the secular decline in the relative price of gas.  Go China!

nattie_carbonnattie_secuar

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Nattie’s Immaculate Reversal

F**k  Technical Analysis.  F%%k  Candlesticks.   That is the way we feel after yesterday’s post about the sure thing short in Natural Gas futures.  When you hear or feel “sure thing” in trading, head for the hills.  Hey, but we were right for about two hours in the pre-market, when the January contract traded down to 3.503, down 1.74 percent from last night’s close.

But Nattie is a wild beast,  a tiger  — it traded in a 6.1 percent range today and closed at it highs.  If you’re trading it, you’ve got to set your parameters and time frame carefully.  Remember this with caution:   JFK said in his Inaugural Speech way back in 1961,

“remember that in the past, those who foolishly sought power by riding the back of the tiger, ended up inside.”  – President Kennedy,   January 20, 1961

Rather than power lust, JFK could have just as well been talking about trading Nattie!

The January contract closed at a 52-week high and is a chip shot, .888% from yesterday’s 52-week high of 3.747…  Hmmmm,  .888,  what would the Chinese think?

In Chinese numerology, 888 has a different meaning, triple fortune, a strengthening of the meaning of the digit 8.[13] For this reason, addresses and phone numbers containing the digit sequence 888 are considered particularly lucky, and may command a premium because of it. – Wikipedia

Is this why they began their Summer Olympics on 8/08/08?    Now we will Trump Technical Analysis with  Chinese numerology.

Seriously, though,  For What It’s Worth,  “There’s something happening here” in Natural Gas.

In this scenario of abundant resources, U.S. companies have been planning on building pipelines and LNG export terminals to ship domestically-produced natural gas to Mexico, Canada and to future LNG export hubs along the coast. These exports hubs will be used for further LNG shipments to markets in South America, Asia, Europe, and the Middle East. – Fiscal Times

Take a look at the price differentials in Nattie across the globe (dated, for sure, but we believe relative prices haven’t changed that much).

nattie_world-prices

The $12 dollar differential in prices between Japan natural gas and the U.S.  will lead to an export boom in order to arbitrage these price differentials.   It is difficult and expensive,  for sure, but the price differential will continue to act as a compelling incentive to export.  It should be made easier under a Trump Administration.  The world price will eventually converge, with a premium for the cost of exporting,  sooner,  probably than later.

And Baby, It’s Cold Outside.

The first arctic blast of the season has hit — blanketing parts of the Rockies and Plains with subzero temperatures early Thursday and heralding a bitter freeze that will affect more than 200 million people.

But meteorologists are warning about a second, perhaps even colder chill that could spread into the East Coast and possibly portions of the South late next week. A shift in a weather system known as the Polar Vortex may be partially to blame, according to The Weather Channel. – NBC

We are perplexed by the Nattie forward curve, however.  Backwardation all the way to the December 2029 contract, which is quoted at 3.17. Very little trading and open interest in these long dated contracts, so take the the prices with a grain of gas, as there is probably very little price discovery or market signal in these contracts.   Maybe the market thinks fracking technology will also be exported and the world will have a terminal glut of Nattie?

So there you have it, folks.   Our attempt to retrofit fundamentals to a very impressive move in Natural Gas and to cover our ass on a bad call and trade in one of the nosiest commodities in the world.

nattie_12_8

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Picture of the Day: Trump, The Raven

Just when the bear was getting comfortable the Raven shows up…and not just “gently rapping, rapping at my chamber door.”

Apropos, no?

the-eagle-has-landed

The Raven
Once upon a midnight dreary, while I pondered, weak and weary,
Over many a quaint and curious volume of forgotten lore—
    While I nodded, nearly napping, suddenly there came a tapping,
As of some one gently rapping, rapping at my chamber door.
“’Tis some visitor,” I muttered, “tapping at my chamber door—
            Only this and nothing more.”
    Ah, distinctly I remember it was in the bleak December;
And each separate dying ember wrought its ghost upon the floor.
    Eagerly I wished the morrow;—vainly I had sought to borrow
    From my books surcease of sorrow—sorrow for the lost Lenore—
For the rare and radiant maiden whom the angels name Lenore—
            Nameless here for evermore.
    And the silken, sad, uncertain rustling of each purple curtain
Thrilled me—filled me with fantastic terrors never felt before;
    So that now, to still the beating of my heart, I stood repeating
    “’Tis some visitor entreating entrance at my chamber door—
Some late visitor entreating entrance at my chamber door;—
            This it is and nothing more.”
    Presently my soul grew stronger; hesitating then no longer,
“Sir,” said I, “or Madam, truly your forgiveness I implore;
    But the fact is I was napping, and so gently you came rapping,
    And so faintly you came tapping, tapping at my chamber door,
That I scarce was sure I heard you”—here I opened wide the door;—
            Darkness there and nothing more.
    Deep into that darkness peering, long I stood there wondering, fearing,
Doubting, dreaming dreams no mortal ever dared to dream before;
    But the silence was unbroken, and the stillness gave no token,
    And the only word there spoken was the whispered word, “Lenore?”
This I whispered, and an echo murmured back the word, “Lenore!”—
            Merely this and nothing more.
    Back into the chamber turning, all my soul within me burning,
Soon again I heard a tapping somewhat louder than before.
    “Surely,” said I, “surely that is something at my window lattice;
      Let me see, then, what thereat is, and this mystery explore—
Let my heart be still a moment and this mystery explore;—
            ’Tis the wind and nothing more!”
    Open here I flung the shutter, when, with many a flirt and flutter,
In there stepped a stately Raven of the saintly days of yore;
    Not the least obeisance made he; not a minute stopped or stayed he;
    But, with mien of lord or lady, perched above my chamber door—
Perched upon a bust of Pallas just above my chamber door—
            Perched, and sat, and nothing more.
Then this ebony bird beguiling my sad fancy into smiling,
By the grave and stern decorum of the countenance it wore,
“Though thy crest be shorn and shaven, thou,” I said, “art sure no craven,
Ghastly grim and ancient Raven wandering from the Nightly shore—
Tell me what thy lordly name is on the Night’s Plutonian shore!”
            Quoth the Raven “Nevermore.”
    Much I marvelled this ungainly fowl to hear discourse so plainly,
Though its answer little meaning—little relevancy bore;
    For we cannot help agreeing that no living human being
    Ever yet was blessed with seeing bird above his chamber door—
Bird or beast upon the sculptured bust above his chamber door,
            With such name as “Nevermore.”
    But the Raven, sitting lonely on the placid bust, spoke only
That one word, as if his soul in that one word he did outpour.
    Nothing farther then he uttered—not a feather then he fluttered—
    Till I scarcely more than muttered “Other friends have flown before—
On the morrow he will leave me, as my Hopes have flown before.”
            Then the bird said “Nevermore.”
    Startled at the stillness broken by reply so aptly spoken,
“Doubtless,” said I, “what it utters is its only stock and store
    Caught from some unhappy master whom unmerciful Disaster
    Followed fast and followed faster till his songs one burden bore—
Till the dirges of his Hope that melancholy burden bore
            Of ‘Never—nevermore’.”
    But the Raven still beguiling all my fancy into smiling,
Straight I wheeled a cushioned seat in front of bird, and bust and door;
    Then, upon the velvet sinking, I betook myself to linking
    Fancy unto fancy, thinking what this ominous bird of yore—
What this grim, ungainly, ghastly, gaunt, and ominous bird of yore
            Meant in croaking “Nevermore.”
    This I sat engaged in guessing, but no syllable expressing
To the fowl whose fiery eyes now burned into my bosom’s core;
    This and more I sat divining, with my head at ease reclining
    On the cushion’s velvet lining that the lamp-light gloated o’er,
But whose velvet-violet lining with the lamp-light gloating o’er,
            She shall press, ah, nevermore!
    Then, methought, the air grew denser, perfumed from an unseen censer
Swung by Seraphim whose foot-falls tinkled on the tufted floor.
    “Wretch,” I cried, “thy God hath lent thee—by these angels he hath sent thee
    Respite—respite and nepenthe from thy memories of Lenore;
Quaff, oh quaff this kind nepenthe and forget this lost Lenore!”
            Quoth the Raven “Nevermore.”
    “Prophet!” said I, “thing of evil!—prophet still, if bird or devil!—
Whether Tempter sent, or whether tempest tossed thee here ashore,
    Desolate yet all undaunted, on this desert land enchanted—
    On this home by Horror haunted—tell me truly, I implore—
Is there—is there balm in Gilead?—tell me—tell me, I implore!”
            Quoth the Raven “Nevermore.”
    “Prophet!” said I, “thing of evil!—prophet still, if bird or devil!
By that Heaven that bends above us—by that God we both adore—
    Tell this soul with sorrow laden if, within the distant Aidenn,
    It shall clasp a sainted maiden whom the angels name Lenore—
Clasp a rare and radiant maiden whom the angels name Lenore.”
            Quoth the Raven “Nevermore.”
    “Be that word our sign of parting, bird or fiend!” I shrieked, upstarting—
“Get thee back into the tempest and the Night’s Plutonian shore!
    Leave no black plume as a token of that lie thy soul hath spoken!
    Leave my loneliness unbroken!—quit the bust above my door!
Take thy beak from out my heart, and take thy form from off my door!”
            Quoth the Raven “Nevermore.”
    And the Raven, never flitting, still is sitting, still is sitting
On the pallid bust of Pallas just above my chamber door;
    And his eyes have all the seeming of a demon’s that is dreaming,
    And the lamp-light o’er him streaming throws his shadow on the floor;
And my soul from out that shadow that lies floating on the floor
            Shall be lifted—nevermore!
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Nattie’s Ugly Reversal

After hitting a 52-week just above a key resistance this morning,  the Natural Gas Jan. futures reversed 5 percent to close at almost the low the of day in after hours trading.

Note today’s outside day or bearish engulfing candlestick on the chart below.  After two two days of long wicks on the candlesticks and a stunning 47 percent move higher since November 9th,  can there be a better short set up, we ask?

Nattie is one difficult beast to ride and trade and the trade needs to monitored carefully.   Your trading pure jet fuel here, folks.

We don’t know where the price will be tomorrow.   There could be a huge draw on the EIA data or temps could drop to 75 below in Chicago, or, whatever.    But risk/reward screams, “go short, young man.”    If you can make money shorting this chart,  we think you never will.

Always with a stop!

nattie

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Stress Test The Rose Colored Glasses!

Good piece by Bloomberg, The Pessimist’s Guide to 2017.  Always prudent to stress test your optimistic view as to what could go wrong.

The Pessimist’s Guide to 2017

December 5, 2016

By John Fraher, Flavia Krause-Jackson and Mira Rojanasakul

Donald Trump and Brexit shocked most of the world in 2016.

But not readers of last year’s Bloomberg Pessimist’s Guide, which warned that the unthinkable could happen in both cases. Now the authors are turning their attention to 2017.

From social breakdown in the U.S. to a nuclear crisis in North Korea to the defeat of Angela Merkel in Germany, the potential for chaos is just as great.

These aren’t predictions. But they show what your social-media news feed could look like if things go wrong.

Click here to read piece

 

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QOTD: All The World’s A Casino

“The world’s not just a stage. It’s a casino, and our lives are games of chance.”

Michael Lewis

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Renzi Fustigazione!

flogging

http://www.repubblica.it/static/speciale/2016/referendum/costituzionale/

 

 

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Quote of the Day: Bond Market Nutcracker

So while the technically-driven surge in equities may be over, a historic short squeeze in Treasuries may be about to unfold, as according to DB calculations, shorts in bond futures the largest in over 6 years with positions short across all bond futures maturities; One small change: shorts in very long dated bond futures are being trimmed from extremes, added in other parts of the curve.  – Zero Hedge


To that, we say Amen!

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