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Oil Plunges As Inventory Build Does Not Confirm Rosy Economic Forecasts
A presumably growing economy, one that has now emerged from a recession (if one listens to the Chairman) needs fuel. Or, as the case may be, oil. So today's oil inventory report did two things: it flatly refuted the Chairman's ongoing propaganda that all is finally well with the US economy, but also played a nasty trick on oil speculators who got majorly burned after oil tumbled as a result of ongoing lack of demand for the black gold. At least all those parked tankers overflowing with oil and betting that sooner or later the stored oil will be put to some use will get a few more chances to finally be proven right.
From the CNN Money:
Inventory rising. The Energy Information Administration
reported a surprise increase in crude stocks by 2.8 million barrels in
the week ended Sept. 18. Analysts were expecting a drop of 2.25 million
barrels, according to a consensus estimate collected by energy
information provider Platts.
Gasoline stockpiles jumped by 5.4
million barrels, according to the EIA report. Analysts had forecasted a
more modest increase of 800,000 barrels.
The government report
also showed that distillates, used to make heating oil and diesel, rose
by 3 million barrels, topping analysts' expectations for a
1.5-million-barrel increase.
And this is what pure, unadulterated speculation looks like: the Nov 09 contract.Yet this is no surprise in the US capital markets casino when companies on the verge of a liquidity crisis can outperform the S&P by over 1,000%.
And here is what mouth gaping surprise at the NYMEX looks like:
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Obviously cash for clunkers has worked!
It won't matter until it does and until then its' the reflexivity cha-cha.
Speaking of the cha-cha and waiting for the Fed did ya see The Hammer (Tom Delay). Not that I watch that stuff, but it was on many of the news - news really ?!&*(^ - shows.
Pete
I know you're not asking about dancing with the stars, please tell me you are not talking about dancing with the stars...
I assume you didn't intend a pun when you used "crack" and "oil" in the same sentence?
BTW, I agree, for what it's worth. But you had me rolling on the floor with your comment. In true sophomoric tradition, I also love the term "crack spread" for an easy laugh.
Hey, it's Wednesday 2 hours before the Fed. What else is there to do?
Man, I would've paid to be a fly on the wall for that debate
Platts reported that Chinese oil demand in August slid 5.4% from July. Platts said that China's implied oil demand totaled 33.02 million metric tons in August versus 34.92 million metric tons in July. Oil refiners in China are reporting that demand is still weak. Reuter’s news reported that Chinese oil company Sinopec had sales of refined oil products still lower than one year ago. Reuters says that despite a moderate inventory draw in August, China's diesel inventories had been building up faster than gasoline had in past months, reflecting the slower consumption for the main transportation fuel used by Chinese industry and trucks.
China End-June Credit Card Delinquencies Up 131%
http://english.caijing.com.cn/2009-09-17/110252991.html
http://ftalphaville.ft.com/blog/2009/09/23/73556/chinas-looming-credit-crisis/
great minds.....
the trend is your friend!
I've been dumbfounded how many people believe China is fine and dandy and not suffering any ill effects.
I guess the people who believe China's economic numbers are the same people who believe Washington's economic numbers.
until the bend in the end.
thank you for the china oil info lizzy. is it true they no longer report electricity usage?
as far as i know they still report that number.
my memory can be fuzzy, but august was up 8% m/m and .3% y/y.
thanks!
Oil stockpiling, cars selling at quarter century low, foreclosures' closet door about ready to burst, commodity stockpiling tapering off, steel forecasts being tampered down, and a market where traders are laughing that fundamentals are crap but technicals rock .....
Move along nothing to see.
Its' a zip-a-dee-doo-dah market Mr. Grant.
The demand is artificially created, and the supply can no longer serve as the basis for a global economy.
For 51:
This is a little experiment. We will do this once, and see how much misery it causes. I don’t want to upset your applecart.
Output Gap Information Systems & Trading Platforms
Talent is the only part of a system that cannot be replaced. The spectrum is appreciating what you have, wanting what you do not have, wanting what others have, and wanting what you cannot have. In isolation, which does not exist anywhere, you would have a normal distribution of behavior.
The force of inertia, which naturally seeks to maintain control over the distribution, rolls out an economy of wanting what you cannot have, creating a distribution shift. Talent naturally swims against the current, creating natural selection.
Chapter 1 Lies, Damned Lies, and Statistics
Throw them in the deep end and see what kind of instincts they have.
Actually, this is not going to be nearly as bad as you may think. This is an extremely powerful set of tools. You just have to get by all the misinformation, outdated models in your head. Forget everything you were taught. Now, isn’t that easy.
We begin by confirming your suspicions. The bell curve is not statistics. Further, the bell curve is the anti-thesis of statistics. You can hardly blame your professors for not standing up to this establishment; it pervades every facet of life in the old economy. This manual can only be physically distributed because we are in a global crisis.
Endurance. You have to understand that legacy special interests were once just like you. They had to beat their way through a jungle, designed over thousands of years to slow them down, gather at personal peril, work in poverty, and watch the people they loved get attacked, all to see their masterpieces continually berated and destroyed. They don’t call it survival of the fittest for nothing.
What do you expect when your work threatens to replace the work of masters across History, and displace the incomes of the majority of people on the planet. It’s like hitting your mother for God‘s sake. There are 9 billion people on this planet, most connected by instant communications. Make it worth their while to participate.
The Bell Curve. Yes, populations naturally seek a normal distribution, the infamous bell curve. If you think in terms balance, you can see why every force has a counter-force.
(diagram - bell curve centered over a fulcrum)
This is what they call the snapshot. History does not exist anywhere as a snapshot. (Distributions are living, moving beings that exist on a fulcrum of fulcrums, which we will discuss in the next chapter.)
The argument against grading students on a bell curve is a good one, and introduces us to real statistics, the theory of time, and several variables in the Unified Field Equation. Let’s see what’s wrong with the practice:
(diagram - bell curve ending at 100%, dotted bell curve ending at 85%, arrow showing left shift)
If the top score on a test of current students is 85%, we make it equivalent to 100% by dividing Joe’s score of 75% by the top score of 85%, getting his relative position in the current class curve. And presto, his new grade is 88%, like magic. Now, Joe needs an A- so his GPA will get him that job or entrance into an ivy league graduate school, so he successfully pleads with his professor to bump him up. His grade goes from a C to an A-.
Mission creep. Watering down. Call it whatever you want, but, over time, system quality suffers and everyone pays a penalty before it’s all over. There is nothing wrong with giving an A for effort, because effective effort results in better performance down the road, but the A has to be for effort, not current performance. As you will see later, effort significantly enhances the performance model; just don’t confuse the two.
Take a look at education outcomes vs. economic outcomes. There’s a time lag, a shift, that a snap-shot cannot capture, but we all pay if we assume tomorrow is going to look a lot like today in this scenario. Sooner or later, the market is going to recognize the swap, reassess the asset value, and trigger release of the non-performing “toxic” assets.
Gravitational Fields. We call this backward shift, or left-skewed distribution, a gravitational field effect on the distribution. The inherent gravity, or social inertia, of rewarding existing performance without respect to History pulls the distribution back, creating a spring effect. It creates a spring effect because the environment always demands improvement. A force and a counter-force results.
This is the inherent problem with rewarding compliance. It removes the possibility of quantum advancement (large jumps) through expectation of increased generational performance:
(diagram - left-skewed distribution with a spring inside it)
We also call this socialization to mediocrity. From an architects perspective, it is neither good nor bad. From the positive perspective, it’s a tool that can deliver mass production, grow scale economies, and capture external economies with its gravitational force, as we have seen with recent developments in the global economy.
A good architect thinks in terms of raw materials currently available in the environment, environmental demand, and how to most effectively put the materials together to satisfy that demand. What you are going to find with all these tools is that stopping at different points in development will result in different outcomes, all of which may be useful.
Spring Activation. The spring in the left-skewed distribution is like holding a rock in the air. Sooner or later, you have to release the rock, and let the system spring forward. With experience, we find that there are relationships between these springs, relative population sizes and forces developed. A good architect can observe these springs develop, and walk in with just the right force at just the right time to control spring activation, speed, and direction.
The snapshot theory fails the minute you take a series of snap-shots and develop expectations for the next snap shot, because it assumes a continuous containment system, with no jumping. In old economy statistics, it’s called regression. Short-sellers live on this scenario.
Once you have gravitational bodies, the shortest distance between two points is not a straight line. Because you can control a stored gravitational force, you can change the speed of development. This is called slingshot development, and is the source of viral product launches in the electronic industry. Practically overnight, a new product takes over a market due to pent up demand.
Relative to those who do not truly understand these gravitational fields, you can move in an unexpected direction, and get to the other end faster. Now, you are controlling speed and direction. Both are relevant to your perception, which makes time relevant to your perception.
Magnetic Fields. Here is where effective effort, not customarily measured with the proper perspective, comes into the picture. Let’s say you go out and get a textbook that allows you to learn the material in 1/3 the time. Then you form a group of like-minded individuals and work together to advance the material. On the tests, your answers natural express your advanced learning. The professor gives you credit, and scores the rest of the class accordingly.
In a truly free economy, this would shift the distribution to the right. Quite obviously, the need for social inertia, the need to forecast future requirements, and the need to have confidence in the source of future cash flows naturally prevents this action, temporarily (we will discuss how the new economy overcomes these problems later in the manual).
(diagram right shift)
Every force quickly triggers development of a counter-force, supported by the larger planetary economy. First one individual jumps forward, creating a small magnetic force, then another and another. Soon the group multiplier effect creates a force larger than the sum of the individuals because they learn from one another.
(diagrams - individual jump, small group formation, stable large group)
In a static world of equal respect among groups, this would give you the snapshot normal distribution, or bell curve. Continuous incremental improvement would occur over time as inertia outliers retired, and the main body advanced toward magnetic outliers. Retirements in both the gravitational and magnetic fields would be replaced by jumpers from a growing main body.
(diagram - gravity distribution, main distribution, magnetic distribution, retirements, and replacement jumpers, large arrow above showing movement of distribution forward)
As we know the world is not static, and the universe evolves by building capacitors and jumping. The distribution, accordingly, moves like an inchworm. First it pulls back, then it leaps forward, like a spring, pulling its hindquarters behind. Then it repeats the process.
This occurs because the magnetic outliers must avoid detection long enough to attract sufficient numbers to reach a sustainable magnetic field, otherwise the omnipresent gravitational field will simply pull the individuals back into the main distribution.
(diagram - inch-worm movement of the distribution over time)
Speciation. A bimodal distribution develops when external forces/distributions add weight, or subsidize, the inertia of a distribution. This temporarily slows the distribution further, while more and more individuals jump to the increasingly magnetic side of the distribution. If enough external force is applied, the distribution cleaves, leaving the inertia side behind for economic recycling, while the magnetic side jumps very far ahead due to the release of the spring. There are many business and biological applications that follow this pattern.
Architects call this process spring & release:
(diagrams - full spring containment, followed by cleavage and catapult)
With modification, it can be used both to replicate, and to incinerate.
Applications. At this point, you can see how statistics needs to be updated to the needs of your organization. However, Labor, Government, and Corporation will each have different needs. Fortunately, if you give different groups the same specifications for a tool, the results will be different. Diversity, and respect for diversity, is a healthy outcome. “Chinese walls” between parts of the organization is the source of learning.
There is always a portfolio of actors in the marketplace, their place dependent on their scope of vision and the environmental demand they are satisfying. In order to adjust as an architect, you must be able to change speed, change direction, daisy chain, step up power, and step down power. You must understand the constants of History, and share a vision into the future.
I remember a similar line of thought from the 60's, probably based on some idea from antiquity.
Natural forces are replicated in all actions and aspects of our lives.
Never saw any follow up or documentation to support the concept.
Is that what your working on now?
would you be so kind to share a link to the whole article?
UMMM, ER, AHHH..... back in the 60's there was no internet. We used memograph machines for duplication. I read a paper back then along the same lines. It's just a vauge memory.
However if you read both E.O. Wilson and Schumpeter you can get near the same concept from a very different path.
Wonderful. Illuminati 101 on the management of herds.
Agree...would very much enjoy reading the entire text.
40muleteam borax
Pretty damn EXCELLENT! Can you please post a link to the whole book/article or the name of the book this is from? Much appreciated.
The problem with these old trading platforms is that they are snapshots.
A cheap solution that will get people going:
Start with a GIS foundation with a river flow analysis overlay. Color the rivers for goods & services; cash flow; etc. You can tweak the GIS to give you asset ponds, lakes, and oceans. You will quickly find that the nation/state boundaries are no longer relevant. Have the window pop-ups feed you whatever characteristic data you care to trade on, and the momentum of the river, along with its source and destination will give you what you want. The new statistical method allows you to calculate spring tension.
If a picture is worth a thousand words, the video stream is worth a million.
(open source: Building the New Economy)
i never front run the oil data. it's way too risky. uso goes down quickly, then up slowly.
riding a bike (cicle) is actually OK in LA. It's not HOT yet but still it's already OK. It was a NO - NO couple years ago. That alone should tell us something about oil demand.
Now imagine if that trillion plus of bailout $ was invested into energy efficiency, grid update etc. Bringing our oil dependency from 1/2 trillion to a 100 bl annually is possible and would be huge for our economy in the long run. Not that Washington DC cares... They would rather waste money on super-trains (thanks to GE lobbing efforts..), those are so shiny and slick (plus rarely pay off for themselves unless a population saturation per mile is very high.)
This saturation can be achieved by an abandonment of the suburbs. Anyone think american cities might turn to european structures, i.e. the Parisean suburbs being the holes.
It was my point re abandoment of the 'burbs.
Sometimes your slant on an article is too biased. While I read every article in your excellent blog I do wish you would present a more balanced view as opposed to trying to present the mirror image of faults you find in CNBC. For instance, "it flatly refuted the Chairman's ongoing propaganda that all is finally well with the US economy" is not fair. Reuters writes:
"Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time," Fed Chairman Ben Bernanke said last week.
Bernanke isn't painting a picture that "all is finally well". In fact, who is painting that picture?
"We are at the very beginnings of this recovery ... We need to make sure that we keep at this, so we have in place a recovery that is going to be self-sustaining, led by private demand, (and) a financial system that can actually provide the credit that is needed," [U.S. Treasury Secretary Timothy Geithner] told a press briefing.
I would argue that they are sending a message of cautious optimism. I agree that MSM is not providing a fair/balanced/unbiased picture (and I agree that all is not well in the economy), but I also wish that ZH would attempt to provide that standard as opposed to only trying to present the extreme reverse view we see in the media.
we pride ourselves in our...how was it put... hyperventilation. alas our style is too flawed to be corrected at this point.
Glad you're going to keep on hyperventilating, its what keeps me here well that and ZH Radio.
...only other reason I show up is RoboTraders chick pics.
Those who hyperventilate don't usually make money in the markets. So, I let TD hyperventilate, I remain calm and collected, and laughing all the way to the bank.
from a technical perspective the recession is
over? what technicals are you looking at?
how can shrinking gdp, declining retail sales,
high and growing unemployment, declining trade
be a technical end to the depression when in fact
these very same markers are indicators of a recession?
why was everyone screaming years ago about a
recession when every indicator was much higher than
they are now?
as you can see with logic like this, any slant
on the data is valid...it is statistical
nihilism....
I guess they aren't going to raise rates this time...
Crude is amazingly weak-even with the dollar smashdown and FOMC minutes it's not pulling past it's 74 highs. In fact it's still off 3 bucks a barrel. The glut out there is apparent and the little games of push the oil through refineries and glut distillates market reads like a cheap novel.
Oil stocks are extremely volatile and can be gamed by withholding/unloading tankers on a prearranged schedule (several million barrels at a time, depending upon the size of the tanker), what percentage of throughput the refineries had, (it was 85% this week, down from last week). Less oil flows through the refineries shows up in greater stocks. This is the time of year that diesel production is ramping up (diesel can be sold to Europe and China). Also, the SPR has been tapped this year to give the impression of oil gluts. Our civilization runs on CL, and the cheap stuff is beginning to run out.
I am ok to hang on to oil.
Too much chatter about Iran:
US Navy missile ships started arriving in Israel on Sunday ahead of next month’s joint missile defense exercise between the IDF and the American military’s European Command.
Called Juniper Cobra, the exercise will include the Arrow missile defense system as well as three American systems – the THAAD, Aegis and PAC3 – that will all be deployed in Israel for the duration of the exercise.
Defense officials said the exercise would not begin for a few weeks, but that the ships were already arriving to begin preparing the infrastructure for the joint drill, the largest since Israel and the US began holding the biennial Juniper Cobra drill in 2001.
The arrival of the ships began a day before Defense Minister Ehud Barak was scheduled to fly to Washington for talks with his American counterpart, Robert Gates. Defense officials said that their talks would focus on the Iranian threat, Israeli-US defense cooperation as well as the role Israel will play in the new American missile defense shield announced last week.
http://www.jpost.com/servlet/Satellite?cid=1253198161404&pagename=JPost/...
Obama Urged to Ready Tougher Iran Sanctions, Military Strike
http://www.bloomberg.com/apps/news?pid=20601103&sid=aGXuRWqsEFos
Zbigniew Brzezinski said the United States should make clear that it will attack Israeli jets if they fly over Iraq on their way to attack Iran.
http://jta.org/news/article/2009/09/21/1008006/brzezinski-us-must-deny-i...
Inventories won't matter that much to price if it all flares up.
Have a look on www.secmal.blogspot.com to read about 'asmi'.
Deflation- which nobody is acknowledging, will right the dollar bubble, bringing down, (ahem) oil, aud, nzd, eur, gbp, commodities, gold... gloabl stocks and chinese everything...
The correlation is so f**ked up that allocation of assets is pointless. You're either 'in risk' or out, bull v bear...
Bernanke the hero v double dip!
The problem is that the pipeline valves have been wide open for so long, they are stuck open. If you try to force the valve, it will snap in half, just like the one you busted off under the kitchen sink last week.
I always wonder why long commodity (especially oil) exposure for the institutional investors is sold in the form of futures-linked vehicles (like USO) despite those institutional investors are willing to make long-term bet? Nearest futures represent on-the-ground oil and oil which will soon to be lifted from the ground, so this is IMHO stupid to participate in this short term process of redistribution of already or soon to be excavated and subsequently consumed oil with long term money coz they do nothing but just produce constant excessive artifical demand. Isn't it much more reasonable to purchase oil in deposits, via oil stocks, if institutional investor is willing to invest in oil?