GLOBAL ECONOMICS AND POLITICS
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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“Well, I rolled and I tumbled, cried the whole night long
Well, I woke up this mornin’, didn’t know right from wrong”. Muddy Waters, “Rollin’ and Tumblin’”
OVERVIEW AND CONCLUSION
Of course the petroleum universe “as a whole” has, as do its various individual crude oil streams and assorted refined products, “its own” past, present, and potential future supply/demand/inventory situation. However, the petroleum circus, including so-called specific oil-related variables affecting it, is not a domain entirely separate from other economic and political phenomena. For example, marketplace history reveals that price levels and trends for the petroleum complex intertwine in diverse ways with benchmark global stock, interest rate, and currency arenas, and with other commodity fields such as base and precious metals. These relationships, including convergence/divergence (and lead/lag) ones between the oil marketplace in general and these other financial playgrounds, can and do change, sometimes significantly.
Marketplace history need not repeat itself, either entirely or even partly. Visionaries differ in their perspectives on and conclusions regarding petroleum and other marketplaces, frequently substantially.
OPEC is an important actor within the oil theater, as are its current producer allies such as Russia. The United States, given its ravenous demand for petroleum plus its booming crude oil output in recent years, also is an important petroleum player. But these entertainers are not independent of other stages and performers.
In the timing and direction of its major price moves, the global petroleum complex does not necessarily or always travel alongside the S+P 500 and other benchmark stock indices. A survey of the critical price turning points since early 2016 for the oil and equity realms nevertheless displays the close connection between petroleum and stock trends.
For related marketplace analysis, see essays such as: “Wall Street Talking, Yield Hunting, and Running for Cover” (5/14/19); “Economic Growth Fears: Stock and Interest Rate Adventures” (4/2/19); “American Economic Growth: Cycles, Yield Spreads, and Stocks” (3/4/19); “Facing a Wall: Emerging US Dollar Weakness” (1/15/19); “American Housing: a Marketplace Weathervane” (12/4/18); “Twists, Turns, and Turmoil: US and Other Government Note Trends” (11/12/18); “Japan: Financial Archery, Shooting Arrows” (10/5/18); “Stock Marketplace Maneuvers: Convergence and Divergence” (9/4/18); “China at a Crossroads: Economic and Political Danger Signs” (8/5/18); “Shakin’ All Over: Marketplace Convergence and Divergence” (6/18/18); “History on Stage: Marketplace Scenes” (8/9/17).
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Petroleum- Rollling and Tumbling (6-10-19)
Petroleum is a key part of the broad GSCI and many other commodity indices. Of course not all commodities travel in the same direction, for they have diverse supply/demand situations. And marketplace timing relationships are not precise; commodities (even within a specific sector such as petroleum) do not all embark in a bull or bear trend at or around the same time. The overall petroleum complex, a key chapter in the commodities in general story, nevertheless has marched more or less alongside the S+P 500.
Each of the assorted petroleum spreads has its own supply/demand variables. Picture a front-to-back intramarket NYMEX crude oil spread or a US Gulf Coast gasoline crack (refining margin) spread. An analytical connection portraying a relationship between petroleum spreads to the S+P 500 and economic recovery (decline) and Federal Reserve policies may seem to be a fairly long stretch.
Yet the price and time movements of one or more important petroleum spreads often “confirm” or warn of changes in outright price trends in the overall petroleum price complex (and its individual marketplaces such as Brent/NSea crude oil, or US Gulf Coast gasoline). So in a web where flat price petroleum patterns generally (roughly) coincide with those of the broad GSCI, trends in oil spreads offer guidance to the broad GSCI trend. Given the rather close bull (and bear) shifts between the GSCI and the S+P 500, petroleum spreads therefore sometimes can offer insight into S+P 500 trends (and into US and international economic growth trends as well). And so Federal Reserve policies tie into some petroleum spread marketplaces. Keep in mind, however, that perceived connections between petroleum spreads and these other domains are only guidelines, and they are not unchanging. Read the rest of this entry »
Many intertwined factors of course influence economic and stock marketplace levels and trends. Both Wall Street and Main Street know United States consumer spending greatly affects United States economic growth and significantly influences that elsewhere. In general, won’t happy and confident consumers tend to spend more freely? As Memorial Day weekend beckons, why not remember key consumer confidence measures? The Conference Board asserts that its “Consumer Confidence Index ® (CCI) is a barometer of the health of the U.S. economy from the perspective of the consumer.” (“Technical Note- February 2011”).
A review of the Conference Board’s Consumer Confidence Index over the past four decades reveals that this measure sometimes can provide helpful guidance regarding the identification (confirmation) of major highs, lows and trends in US equity benchmarks such as the S+P 500. Given the close ties between stock and overall commodity marketplace trends in recent years, commodity players should monitor the Confidence Index.
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US Consumer Confidence and Stocks