Natural Gas

While the September Consumer Price Inflation report was in line with expectations, with the headline CPI declining -0.2% in the month - the biggest monthly drop since January - and unchanged from a year ago, just as consensus predicted, it was all about the core CPI where attention was focused, and especially one item: rent, which rising at 3.7% Y/Y is now the hottest it has been since the fall of 2007.

Aside from Chinese monetary data, it was a relatively quiet session in which traders were focusing on every move in the suddenly tumbling USD, and parsing every phrase by central bankers around the globe, as well as the previously noted piece by Fed mouthpiece Jon Hilsenrath which effectively ended the debate whether there will be rate hikes in 2015. Adding to the overnight froth were ECB speakers first Ewald Nowotny and then Spain's Restoy, who said that euro-area core inflation "clearly" below goal, remarks which were immediately assumed to signal increasing pressure to boost stimulus, and which promptly translated into even more weakness in EUR and equity strength, pushing US futures up about 15 points from yesterday's close.

• Democratic rivals back Clinton on emails, but little else in scrappy debate (Reuters)
• Hillary Clinton Shows Relentless Efficiency in First Democratic Debate (WSJ)
• U.S. Examines Goldman Sachs Role in 1MDB Transactions (WSJ)
• JPMorgan Says Trading Pain Isn't Over After Third-Quarter Slump (BBG)
• Islamic State battles insurgents near Aleppo as army prepares assault (Reuters)
• Oil Slide Means `Almost Everything' for Sale as Deals Accelerate (BBG)

After several purported incursions into Turkish airspace by Russian fighter jets, Ankara is "irate" at Moscow and now, tensions over Syria threaten to undermine the two countries' energy relationship. Thus, the Nord Stream line to Germany - the capacity of which is set to double - has now become more important than ever for Gazprom. 

News That Matters

• Central Bankers Urge Fed to Get On With Interest-Rate Increase (WSJ)
• Bond Market Casualties Leading Biggest S&P 500 Revival Since '11 (BBG)... on hopes of more easing
• U.S. Patrols to Test China’s Pledge on South China Sea Islands (WSJ)
• Merkel Under Fire: German Conservatives Deeply Split over Refugees (Spiegel)
• Assault Weapons Ban Before U.S. Supreme Court (NBC)
• Hedge Funds Are Playing 'Dangerous Game' With Copper (BBG)

Russia can be seen as maneuvering to split OPEC into two blocs, with Russia, although not a member, persuading the “Russian bloc” to isolate Saudi Arabia and the Gulf Arab OPEC members within OPEC. This might persuade the Saudis to seek a compromise with the have nots.

Without government intervention the “invisible hand” of the world oil market will simply bankrupt US shale companies and with it destroys the US shale oil industry.

With supply set to increase meaningfully over the next few years, JPMorgan sees a buyer's market until 2020 with limited new long term contracts being signed and renewal of existing contracts post expiry likely to have more price diversification (i.e. more Henry hub component) and offtake/diversion flexibility. A recent trip to Asia identified 10 key themes reinforcing their bearish outlook on the LNG market for the rest of the decade.

The unforeseen consequences of the advent of electric cars will reverberate much farther than the demise of dealerships and significant shifts in market share in the auto industry.

News That Matters

Terrible economic news is wonderful news for markets, all over again, and with the worst S&P500 quarter since 2011 set to close today, some horribly "great" news is just what the window-dressing hedge funds, most of whom are deeply underperforming the broader market (not to mention Dennis Gartman) ordered.

This system is pure insanity, as are its prices... it wouldn’t bother us if the price of gold went negative, just like propane in Alberta (after all, we're not trading paper currency for gold, just to trade it back for more paper currency if the 'price' goes up). The idea behind buying gold is to swap paper money for something real. Banks can rig its 'price' all they want; gold’s true value comes from its function as a long-term form of savings and a hedge against a broken financial system. And the more ridiculous the system gets, the more valuable it becomes.

Most people believe that low oil prices are good for the United States, since the discretionary income of consumers will rise. There is the added benefit that Peak Oil must be far off in the distance, since “Peak Oilers” talked about high oil prices. Thus, low oil prices are viewed as an all around benefit. In fact, nothing could be further from the truth...

Remember when the commodity and gas plunge was supposed to be an "unambiguously good" tailwind for discretionary US spending, something which we warned over and over would never happen as the Obamacare "mandatory tax" surge pricing for healthcare insurance more than offset and discretionary savings? Moments ago another 825 or so soon to be formerly paid workers just found out the hard way just how clueless the vast majority of the punditry was when Chesapeake energy just announced it would terminate 15% of its workforce, or about 825 of its 5,500 most recent employees, as a result of the "current oil and natural gas prices."