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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PETROLEUM: ROLLING AND TUMBLING © Leo Haviland June 10, 2019

“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.

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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.

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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)

MARKETPLACES AND POLICIES- MAKING CONNECTIONS © Leo Haviland, November 29, 2011

Since the current economic crisis emerged in 2007, a rough pattern has been that major movements and levels in US Treasury ten year note yields have preceded or coincided with those in the S+P 500. Thus, “in general”, plummeting UST yields have been paralleled by diving stock prices. And rising interest rates are connected to rallies in stocks. So in today’s world, gurus and guides often underline that higher and higher UST rates fit an economic recovery (health) scenario. In contrast, collapsing rates indicate looming (or actual) disaster; hence the popularity of flight to quality and safe haven commentary in regard to UST. Such relationships between the UST 10 year note and stocks (and variables allegedly bound to them) of course help forecasters to assess probabilities for and predict important debt and equity trend changes. Looking forward, this ongoing pattern may well persist.

Yet at some point, and arguably within the next several months, the present relationship between the US ten year and the S+P 500 may change. Thus rising UST yields eventually may coincide with sinking stocks. What key trading levels for the 10 year should one keep an eye out for? Such trigger point ranges will vary over time. So anyway, what guidelines for nowadays? If the US 10 year note yield floats decisively above the 2.50 percent level, and if stocks rally very little as that yield barrier is breached, that would hint the current (2007-2011) UST/S+P 500 relationship is altering.

As the global economic crisis flows on and on, many of its intertwined actions and participants (and thus marketplace relationships) may remain relatively unchanging. But they are not stagnant. Today’s marketplace voyagers should wonder if the crisis has drifted closer and closer to a new round of difficulties. Look at European yields, and place Germany on the sidelines. Focus instead on Greece, Portugal, Ireland, Spain, and Italy. These countries show that severe economic problems (and downturns) are not always or inevitably associated with falling (or low) government interest rates.

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Marketplaces and Policies – Making Connections (11-29-11)