asiablues's blog

Natural gas has become an almost forgotten commodity with poor market fundamentals keeping a lid on the price. But the fuel is not forgotten by Exxon Mobil (XOM). Exxon just announced this morning that it will buy XTO Energy (XTO) in an all-stock deal worth $31 billion as the oil giant moved aggressively towards the abundant unconventional natural gas source at home.

Gold fell for the first time during last week, off 4% on Friday to $1,162.40 an ounce, the biggest drop since Dec. 1, 2008 after the new U.S. jobs data showed unexpected strength. While gold has some underlying support from central banks and investment funds, there are some indications suggesting gold is moving mostly on momentum, and that a deeper correction may be due.

On a global scale, Dubai World's debt problem seems relatively minor, but it illustrates the impact from one tiny country in an increasingly interconnected world. The Dubai news also cast doubt over the strength of the U.S. economic recovery, and the prospects for a bottoming of property prices.

Broad capital spending cuts, and curtailed production have landed machinery companies in the pits but mining equipment makers will likely be among the first to emerge from under the recessionary rubble. The reason is that commodity prices are up substantially from their recent lows, at a time when the world is running out of all those precious natural resources.

When Obama sets foot in China for the first time, he will confront a dramatically altered balance of power between China and the United States. This seismic shift is driven by China's astonishing economic growth over the past two decades and has accelerated during the global financial crisis. Its 9% to 10% annualized GDP growth rate in the past two and a half decades is unprecedented in world history.

Saudi Aramco, national oil company of the world’s largest oil producer and exporter, decided earlier this month it will drop West Texas Intermediate (WTI) as the benchmark for pricing its oil for sale in the US market. The news instantly sparked speculation that other major producers would follow. Chavez (not surprisingly), reportedly already indicated Venezuela would follow Saudi’s lead adopting the new index.

In this interview with CNBC on Nov. 4, 2009, Dr. Nouriel Roubini, professor of economics at the Stern School of Business, New York University and chairman of RGE Monitor, cautions investors of the coming asset bubble and crash caused by the dollar carry trade, and at the same time shared his views on the economy and housing.

This is the second time in many weeks that Dr. Roubini warned of a growing dollar carry trade and threatening to cause a global implosion. The following is a summary of his CNBC interview along with my comments.

The title says it all.....

Since the financial crisis last fall, currency markets have taken their cues mostly from stock markets. When stocks plunged in March of this year, investors rushed to the safety of U.S. government bonds, pushing the dollar index up to 89.62, the highest point this year. The value of the euro has risen by 79% in nine years since euro hit 0.84 in Oct. 2000. What's next for the U.S. Dollar, and its impact on the market?

Last Friday, U.S. crude oil futures finished above $78, the highest level in a year, even though the U.S. continues to sit on ample supply of petroleum. Some analysts said a sudden upward spike was still unlikely, while others are predicting an immanent correction down below $70. However, if you take a closer look, it is evident that the current crude oil market is almost entirely detached from fundamentals. Furthermore, there are several factors supporting oil rising to new levels, as fundamentals are out the window in the near to medium term.

On Sept. 4, the NYMEX October futures contract for natural gas closed at $2.73/mmbtu, a 7-year low, as the ratio of oil to natural gas prices ballooned to 25-to-1, compared to its energy conversion ratio of 6-to-1.

Now, just one month later, natural gas has rebounded 75% to close at $4.77/mmbtu for NYMEX November delivery last Friday on record high levels of natural gas in storage, leaving investors to wonder if prices have bottomed out and it's time to jump back into the market, or if the sector is dead.

Brazilian stocks rallied, along with the nation's currency, as investment prospects brighten on the news that Rio de Janeiro will host the 2016 Summer Olympics, making the Bovespa the world's best-performing major index last Friday.
Rising commodity prices this year have led investors to buy emerging market assets where the economies tend to be more commodity-dependent. Both emerging markets and industrial metals group are outperforming U.S. equities so far this year.

Currently, the great market debate seems to center around two chief concerns: Have stocks jumped ahead of the economic recovery? And if so, are they setting up for a big correction? To better gauge the real economic condition, I typically like to look at commercial trade related indicators to verify just how good or bad business is doing. One of the most ignored leading economic indicators is probably freight volume. A review of some key freight indices should provides a much more sobering picture of the US economy.

The price correlation between equities and bonds of late has some argue that typically, if equities are trending higher, then bonds would head lower, and yield would be higher, due to concerns of higher inflation. So, the fact that bonds and equities in general are both firm seems to beg the question - which rally would end first - equities or bonds?

You may recall that the crude spread gap opened just a few weeks after Lehman Brothers failed and AIG required a capital infusion. During the super contago phase of late 2008 and early 2009, the spread was so ridiculously wide that the rate of return was close to 70% at one point of time.
Those few who had a role in taking advantage of the super contango ended up boosting the spot oil price back to a more normal relationship to the outer months.