Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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US NATURAL GAS: CAUGHT IN THE MIDDLE © Leo Haviland February 1, 2016

“So much trouble in the world…
The way earthly thin’s are goin’
Anything can happen”. Bob Marley and the Wailers, “So Much Trouble in the World”



In economics, politics, and other cultural fields, players create a variety of competing perspectives. They select between and arrange a variety of diverse variables to produce their arguments and conclusions. In commodity, currency, interest rate, and stock marketplaces, bulls and bears therefore tell a variety of contending stories. In natural gas as in other marketplace battlegrounds, an array of speakers creates assorted viewpoints fighting to attract attention and persuade eager audiences.



“Dangerous Times in US Natural Gas” (11/2/15) concluded: “The probable range for the United States natural gas marketplace (NYMEX nearest futures continuation basis) for the next several months is a relatively broad avenue between major support at 1.65/1.90 and significant resistance at 3.10/3.45.” The NYMEX natural gas major bear trend that followed 2/24/14’s major peak at 6.493 smashed through 4/27/15’s 2.443 minor low, 10/27/15’s 1.948 interim low, and the last prior major bottom (1.902 on 4/19/12), crashing to 1.684 on 12/18/15. Assuming normal weather for the balance of winter 2015-16 and spring/summer 2016, this range probably will persist for the next several months as well.

The high since December 2015’s low is 1/8/16’s 2.495. What would enable US natural gas prices (nearest futures) to sustain travels over 3.00? It probably will require significantly colder temperatures for the balance of winter, a blazing spring and summer, or (and especially) noteworthy cuts in natural gas production. Stronger than expected US (and global) economic growth would help rally natural gas prices. A major bull move in commodities “in general” (and especially in the petroleum complex) and a significant reversal of the major bull move in the broad real trade-weighted US dollar to some extent would assist a bull move in natural gas.

However, a somewhat significant containment risk (supplies too high relative to available storage capacity), nevertheless exists for US natural gas around the end of calendar 2016 build season. If containment fears grow stronger, and especially if actual problems develop, the 1.65 floor could be broken. In addition, US economic weakness (especially if accompanied by similar slumps around the globe), renewed feebleness in commodities (particularly in the petroleum world), and a continued strong trade-weighted US dollar would help to keep US natural gas prices under pressure.


Historical analysis indicates the major bear trend in US natural gas from February 2014 to December 2015 voyaged sufficiently far in price and duration terms to conclude that a trend shift from bearish to sideways occurred with December 2015’s low. However, the dramatic February 2014 to October 2015 price tumble is not the greatest or longest on record. So a further descent in NYMEX natural gas would not be unprecedented.

Anticipated end March 2016 gas inventories probably will be high in both arithmetic (bcf) and days coverage terms, a bearish consideration. However, based upon US Energy Information Administration (EIA) anticipated end October 2016’s 52.1 days coverage level slides 3.4 days beneath the 2006-15 end October average of 55.5 days and 1.5 days under 1990-2015’s 53.6 days.

Nevertheless, modest days coverage levels for October 2016 does not eliminate a containment danger; one should focus closely on arithmetic levels. The days coverage perspective of course does not provide a complete viewpoint on the natural gas inventory situation and related price risks. After all, arithmetic quantities (bcf) of gas must be put in arithmetic storage places. Especially if little new natural gas storage capacity has been (and is being) created, containment problems could emerge around the end of the 2016 inventory build season (roughly around end October 2016). And currently, the containment risks for the end of build season 2016 are not insubstantial; this bearish potentiality weighs on prices.

Yet sustained low natural gas prices could reduce production more than some soothsayers forecast. This would help reduce containment risks. Note the big drop in US natural gas rig counts. A sustained slump back under 2.00 might boost electric power switching from coal to gas.

Everyone knows that much can happen between now and 2017, whether in natural gas or elsewhere. Yet based upon the EIA’s bcf prediction, natural gas days coverage at end October 2017 probably will be less than average, a bullish factor. And the EIA’s bcf arithmetic inventory forecast for end October 2017 implies there probably will not be a containment problem around the end of build season 2017.


Natural gas prices often travel substantially independently of both petroleum (and commodities “in general”) and so-called “international” or “financial” marketplaces and variables. Trend changes in NYMEX natural gas need not roughly coincide with one in the petroleum complex or commodities in general, or currency, stock, or interest rate playgrounds.

However, especially since mid-to-late June 2014 (NYMEX natural gas nearest futures interim high 6/16/14 at 4.886) and into calendar 2015 (gas interim top 5/19/15 at 3.105), bearish natural gas price movements intertwined with those in the petroleum complex (and commodities in general) and the bull move in the broad real trade-weighted US dollar. Such natural gas retreats to some extent paralleled slumps in emerging marketplace stocks. Note also the timing coincidence between May 2015’s natural gas top and the S+P 500’s 5/20/15 peak at 2135. In regard to the timing of the S+P 500’s May 2015 high, note that the nominal broad trade-weighted dollar (Federal Reserve, H.10, which has daily data) made an interim low at 112.8 on 5/15/15 before appreciating further.

See “The Curtain Rises: 2016 Marketplace Theaters” (1/4/16), “Japanese Yen: Currency Adventures (2007-09 Revisited)” (1/14/16), “Commodities: Captivating Audiences” (10/12/15), and various related essays.

Natural gas prices indeed can trade “on their own”. But suppose a sustained bull move finally appeared in commodities “in general” (especially petroleum). Worldwide OECD industry and United States petroleum stocks are very elevated. OPEC next meets 6/2/16. It remains determined to capture market share and induce output cutbacks by high-cost oil producers around the world (including some American and Canadian ones). But is crude oil under 30 dollars a barrel “irrational”? The chairman of Saudi Arabia’s state oil company, Aramco said: “’The market has overshot on the low side and it is inevitable that it will start turning up’”, predicting higher prices by the end of the year.” (Financial Times, 1/22/16, p20). Will OPEC reach agreement with non-OPEC nations such as Russia to boost prices? Might OPEC hold an emergency meeting?

Key global central banks battle to ensure economic growth, create sufficient inflation (avoid deflation), and reduce unemployment. The European Central Bank recently suggested it might ease its already highly accommodative policies further (ECB Statement and Press Conference, 1/21/16). The Bank of Japan recently (1/29/16) eased its lax monetary policy even further, adopting negative interest rates. Will the Federal Reserve delay additional interest rate increases?

The Fed and its allies probably do not want the S+P 500 and related stock marketplaces to crash under their January 2016 lows. They also probably do not want the dollar’s bull move to extend much (if at all) beyond its January 2016 high. The US dollar’s major bull trend has been long and powerful. From its July 2011 major low around 80.5 to the recent January 2016 high at 101.2, the broad real trade-weighted dollar has climbed 25.8 percent (Federal Reserve, H.10; monthly average). What will happen to natural gas prices if the S+P 500 (and emerging marketplace stocks “in general”) rallied substantially? What if the US broad real trade-weighted dollar weakens notably (even if it remains relatively strong)?

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US Natural Gas- Caught in the Middle (2-1-16)

JAPANESE YEN: CURRENCY ADVENTURES (2007-09 REVISITED) © Leo Haviland January 14, 2016

In Akira Kurosawa’s famous film “Yojimbo”, a farmer remarks: “Everybody’s after easy money.”



In recent months, much marketplace and media attention regarding foreign exchange arenas has focused on the travels of the United States dollar, the Chinese renminbi, the Euro FX, and an assortment of emerging marketplace currencies. The Japanese Yen has captured relatively little of the limelight. But it should.

Marketplace history of course need not repeat itself, either completely or even partly, but players should not overlook or dismiss parallels. The Japanese Yen’s rally in the past few months reflects current (and points to further) worldwide economic weakness. Recall the Yen’s rally during the worldwide economic crisis of 2007-09.

During the acceleration of the global economic disaster of 2007-09, both the Japanese Yen and the United States dollar made major bull moves on a broad real trade-weighted (effective exchange rate) basis. The Yen tumbled dramatically from its 2011/2012 summits. But that bear move probably ceased in mid-2015. The modest rally in the Yen since June 2015 has coincided with the continued advance of the dollar’s broad real trade-weighted major bull move. Moreover, as during the 2007-09 crisis span, the Yen’s effective exchange rate climb has accompanied a rally in its cross rate against the dollar.

Not only is the current Yen bull trend a bearish sign for world economic growth. It also is a bearish indicator for the Nikkei, S+P 500, and other key stock benchmarks. As massive Yen depreciation alongside quantitative and qualitative easing (QQE) helped to propel the Nikkei (and thereby other stock marketplaces such as the S+P 500 higher), growing Yen strength (all else equal) tends to push the Nikkei and other stock realms lower. The Yen march upward since June 2015 coincides with slides in equities, a drop in the US Treasury 10 year note yield, and renewed sharp falls in commodities “in general” (and petroleum in particular).


On 1/14/16, the S+P 500 touched a low at 1879, very close to its 8/24/15 low at 1867. It then rallied, closing around 1922. The Nikkei’s 1/14/16 low at 16944 hovers right above its 9/29/15 trough. What about the Shanghai Composite? Its low on 1/14/16 at 2868 neighbors its 8/26/15 depth at 2851.

Previous essays have discussed the Federal Reserve Board’s effort to slow, halt, or reverse marketplace declines in the S+P 500. For example, see “Playing Percentages: Stock Marketplace Games” (7/13/15). In the current environment, stock slumps of around ten and 20 percent from an important plateau (such as the May 2015 one) are important guideline levels for the Fed. The Fed’s preferred method to stop downward moves of around ten percent is talk (wordplay) rather than action. Falls of around 20 percent (or more) increase the odds of action (perhaps even renewed quantitative easing).

Thus today’s speech from James Bullard, the President of the St. Louis Fed, is rhetoric aiming to support US (and perhaps other) stocks (“Oil Prices, Inflation and U.S. Monetary Policy”).

Such charming wordplay from the Fed (and its central banking allies) can induce rallies in the S+P 500. However, it probably will not stop the S+P 500 from resuming its bear move and breaking beneath its August 2015 bottom. The Nikkei will fall under its 9/29/15 low, and the Shanghai Composite will venture beneath its late August 2015 bottom. The broad real TWD will remain strong for at least the near term; the Japan EER will continue its modest rally, as will the Yen’s advance against the US dollar.


For additional currency, stock, interest rate, and commodity marketplace analysis, see “The Curtain Rises: 2016 Marketplace Theaters” (1/4/16) and earlier essays.

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Japanese Yen- Currency Adventures (2007-09 Revisited) (1-14-16)

THE CURTAIN RISES: 2016 MARKETPLACE THEATERS © Leo Haviland January 4, 2016

Shakespeare proclaims in “As You Like It” (Act II, Scene VII):

“All the world’s a stage,

And all the men and women merely players”.


As the 2016 international economic (and political) drama commences, the worldwide economy not only is sluggish, but also feebler than most forecasters assert. International real GDP, as well as that in the United States, has a notable chance of slowing down further than many expect (the International Monetary Fund predicts real global output will increase 3.6 percent in calendar 2016; “World Economic Outlook”, Chapter 1, Table 1.1).

The ability of the Federal Reserve Board, European Central Bank, Bank of England, Bank of Japan, China’s central bank, and their friends to engineer their versions of desirable outcomes via highly accommodative policies has diminished. Beloved schemes such as quantitative easing (money printing) and yield repression and related rhetoric are becoming less influential. Ongoing significant political divisions and conflicts (America’s troubling carnival represents only one example) likely will make it challenging for political leaders to significantly promote substantial (adequate) growth.

The failure of longer term US government yields such as the UST 10 year note to rise substantially despite the Fed’s recent modest boost in the Federal Funds rate represents a noteworthy warning sign regarding American and global financial prospects. Note also very low sovereign yields in much of the Eurozone (picture Germany); Japanese government rates remain near the ground floor. However, yields of less creditworthy debt instruments, whether sovereign or corporate, probably will continue to climb in 2016, another ominous indication.

For the near term at least, the broad real trade-weighted US dollar probably will remain strong. Emerging marketplace equities and commodities “in general” likely will persist in bear trends. What does the rally of the dollar above its late August/September 2015 heights signal? What does the collapse of benchmark commodity indices such as the broad GSCI beneath their late August 2015 lows portend? These warn not only of worldwide economic weakness, but also of further declines in the S+P 500. Note that emerging marketplace stocks hover fairly closely to their 2015 depths. The S+P 500 probably will remain in a sideways to bearish trend.

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The Curtain Rises- 2016 Marketplace Theaters (1-4-16)

AMERICA: A HOUSE DIVIDED © Leo Haviland December 7, 2015

Before Abraham Lincoln became President and the outbreak of the American Civil War, he stressed regarding the slavery issue: “A house divided against itself cannot stand.” (Speech, “A House Divided”; Springfield, Illinois, June 16, 1858). He added: “I do not expect the house to fall—but I do expect it will cease to be divided.” Lincoln’s “house divided” metaphor traces back to the Bible. Jesus warned (Matthew 12:25; see also Mark 3:24-25): “Every kingdom divided against itself is brought to desolation; and every city or house divided against itself shall not stand.”


From colonial times to the present, America always has had political divisions. History reveals that such differences- whether based on political ideology, economic viewpoints and interests, religious or other social opinions, “human nature”, overseas events, or other phenomena- can vary in substance and intensity. Although sharing of the American Dream culture helps to unite Americans, diverse visions regarding the Dream’s content exist, evolve, and are debated. Political wars, battles, fights, feuds, quarrels, squabbles, and disagreements never disappear entirely even though that rhetoric can differ in quantity, severity, scope, and quality.

Doomsday or other terribly bleak scenarios have appeared within American political discussions. However, nowadays “civilization as we know it” is not ending (even if it arguably has deteriorated), economic growth continues (though often fitfully), and so-called “core values” expressed by the American Dream remain (in various fashions) shared. America nowadays obviously is not as divided as it was during its long and bloody Civil War. The American scene did not banish physical violence as part of the process of resolving notable national or regional disagreements. Recall wars with Indians, labor (union) fights, and the civil rights movement. Yet significant internal national conflicts, especially after the Second World War, increasingly have been resolved within a comparatively peaceful political process, including the passage and interpretation of laws.


However, a brief survey of the United States political realm from the national perspective nowadays suggests that America’s political house over the past several years probably has become more divided than usual. It probably will remain so for quite some time, and at least through the 2016 election campaign.

Political fights often can express (reflect) economic phenomena, including diverging doctrines and competing practical interests. What does the recent picture display? Political battles and resultant significant legislative gridlock within the American political realm has coincided with sluggish real GDP growth, weak average household income, an elevated poverty level, and increasing economic inequality.

Is increasing political conflict confined to the American domain? Political (as well as economic, social, and religious) divisions of course exist around the globe. Reasons for fights over power within the United States are not necessarily the same as those inspiring political conflicts elsewhere. And cultural analysis must beware of overgeneralization and oversimplification. The world as a whole is not completely falling to pieces. Yet it nevertheless seems that political hostilities within and between many nations (and between groups with different views and aims) around the globe, as in the US, have increased in the past few years. This trend, especially if it worsens, arguably endangers international (and American) economic expansion. Severe and heated political divisions not only often reflect economic problems, but also can create or magnify economic (and political) risks. World history (for example, after the First World War) reveals that substantial and widespread economic distress and fears can greatly assist the rise of rather extreme political (economic) views, whether far left, far right, ultranationalist, fringe, and so forth.

In recent years, in the United States and many other advanced nations, insufficient economic output, political divisions, or both increasingly have encouraged faith in and reliance on central banks to spark and sustain economic growth.

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America- a House Divided (12-7-15)