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.
Subscribe to Leo Haviland’s BLOG to receive updates and new marketplace essays.
Not only does recent Middle East political turmoil flood the news. Actual supply interruptions, as well as conjectural ones, of course influence petroleum and other trading and hedging behavior.Increasing petroleum consumption in non-OECD (developing) nations, though it is challenging to measure, is a bullish factor. There’s probably been a shift within the petroleum industry from a rather confident “just-in-time” orientation to a more fearful “just-in case” bias regarding preferred levels of inventory holding. Moreover, keep in mind the continued bullish effects of the weak United States dollar, low policy interest rates in America and many other OECD nations, noteworthy quantitative easing (money printing), and the global economic recovery story in general and associated rallies in stock marketplaces. Moreover, to many soothsayers onWall Street and beyond, commodities (particularly petroleum) are a new asset class. This faith inspires “alternative investment” (buy and hold for the long run) in that universe, thus tightening petroleum free supply and pushing prices higher.
By around calendar 1996, US petroleum statistics suggest a move to lower inventory holdings in days coverage terms, probably at least due to widespread faith in the appropriateness of just-in-time inventory management.
So the longer that US (and OECD) holdings such as those of March 2011 remain high relative to the 1996-10 period, the more it seems that there has been a partial shift (by at least some industry members) to a just-in-case approach. Given what may happen in the oil world, why not hold a bit more around “than usual”. Players may grab an three or four days extra now relative to just-in-time needs, as versus say 10 or more days in the distant past.
Both the 2008 and 1987 eras hint that any major (final) high in the petroleum complex will be fairly near in time (within a few months, either before or after) one in United States equities.
FOLLOW THE LINK BELOW to download this market essay as a PDF file.
Inside the Petroleum Jungle (Desperate Housewives, Episode 10)
Gold reached an all-time high of $1431 per ounce on 12/7/10 (COMEX nearest futures continuation). Will gold ever fall from the heavens back to earth, or at least toward earth?
With the exception of the recent rounds of Middle Eastern turmoil, many fundamental factors related to gold are old news. Thus a review of price and time analysis warns that gold probably will establish a noteworthy top soon. Calendar March 2011 is a likely time.
Think of the familiar chant: weak US dollar equals (results in; is paralleled by) strong gold, strong dollar means weak gold. Recall a related popular mantra in recent years. Weak dollar makes for strong US (and many other) equities, with a strong dollar reflected by declining or feeble equities. Some historical perspectives indicate that these ritualistic refrains often have merit. The dusty past also indicates that such financial perspectives are not Natural laws. Is a very weak US dollar (reflected by high gold prices, perhaps) in a rising interest rate environment bullish for the S+P 500 and similar stock benchmarks? Not necessarily, and not forever.
Although the dollar’s dreary dive often encourages gold to fly higher (and let’s keep viewing gold in US dollar terms), what about a very weak dollar? How enthusiastic will foreigners (and many Americans) remain in regard to the financing of the US fiscal deficit disaster? Sooner or later, the current significant dollar weakness- and certainly another round of noteworthy dollar depreciation- alongside rising interest rates will undermine the US and global economic recovery and create a bear trend for equities. These interrelated variables will reverse gold’s ascent and create (or accelerate) a bear marketplace for gold (and eventually commodities “in general”).
FOLLOW THE LINK BELOW to download this market essay as a PDF File.
Gold- Back to the Future
View Leo Haviland’s profile