Energy & Commodities

China imports? Commodities in the cross-hairs...

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Posted by Jack Crooks - Black Swan Capital

on Tuesday, 10 July 2012 07:24


“But now something beyond the incompetence of the financial elite and the big banks may be putting capitalism in peril -- an unmistakable odor of amorality, sleaziness and corruption.” Pat Buchanan 

Of Interest 

Europe Accelerates Aid to Spanish Banks (Bloomberg) 

China's Deflationary Threat (Businessweek) 


Long positions on commodity futures increased the most in two years. As it relates to the managed money category of the Commitment of Traders report, hedge funds decide to pile in during the week ending July 3. Do hedge funds know something we don’t? Or are they just positioning ahead of a third and fourth quarter they expect will be a repeat of 2011 and 2010? 

China just announced an unexpected increase in their trade surplus, a result of an unexpected decline in imports. Notable were the declines in commodity imports – especially copper, iron ore, and crude oil. Some might say this decline was seasonal sluggishness. Some might say it was only a matter of time. We think the risk is to the downside unless the Chinese government’s promised infrastructure stimulus projects create notable demand for commodities and raw materials before the year is over. Don’t bet on it – sustained demand from these projects, considering their relatively modest profile, would be quite the feat. Chinese GDP is to be reported on Friday. Expectations are for a print below 8%. Investors have been quick to predict China’s managed slowdown will bottom out in the next few months. That makes sense, considering China’s resiliency over the last two years. But when second quarter results are released Friday, we’re likely to see a sixth consecutive slowdown in China’s growth rate. Chinese officials appear somewhat desperate, considering their surprise rate cuts recently. I’m not too confident Chinese policymakers can have the influence they once had on the economy; there are too many external forces to keep the pressure on China’s economy. 


We’ve talked about our expectations for copper to continue its downturn; same goes for crude oil, as we just released a recommendation on DTO last week. But iron ore may be an area of interest – the Market Vectors Steel ETF (SLX) holds shares of key iron ore and steel industry players (though the volume is rather low). Time to sell short SLX as Chinese iron ore imports begin to dissipate? 

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Energy & Commodities

Canada's & Probably Your Key To Prosperity

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Posted by Lisa Corbella of the Calgary Herald

on Thursday, 05 July 2012 07:29

Today, let's have some fun and play Fairy Godmother to Quebec . Let's grant the province the wish it articulated in Copenhagen . Wave the magic wand and poof, wish granted. Shut down Alberta 's oilsands, except, since it's Quebec making the wish, we have to call it tarsands, even though it's not tar they use to run their Bombardier planes, trains and Skidoos.

Ah, at last! The blight on Canada 's reputation shut down.  All those dastardly workers from across Canada living in Fort McMurray, Calgary and Edmonton out of jobs, including those waitresses, truck drivers, nurses, teachers, doctors, pilots, engineers etc. They can all go on Employment insurance like Ontario autoworkers and Quebec parts makers! 

Closing down Alberta 's oil industry would immediately stop the production of 1.8 million barrels of oil a day. Supply and demand being what it is, oil prices will go up and therefore the cost at the pump will go up, too, increasing the cost of everything else.

But lost jobs in Alberta and across the country along with higher gas prices are a small price to pay to save the world and not "embarrass" Quebecers on the world stage. Not to worry though, Saudi Arabia, Libya and Nigeria can come to the rescue. You know, the guys who pump money into al-Qaida and help Osama bin Laden target those Van Doos fighting in Afghanistan . Bloody oil is so much nicer than dirty tarsands oil.

Shutting down the oilsands will reduce Canada 's greenhouse gas (GHG) emissions by 38.4 Mt (megatonnes). Hooray! It's so fun to be a Fairy Godmother! While that sounds like a lot, Canada only produces two per  cent of the world's man-made GHGs and the oilsands only produce five per cent of Canada 's total emissions or 0.1 per cent of the world's emissions.  By comparison, the U.S. produces 20.2 per cent of the world's GHG emissions, 27 per cent of which comes from coal-fired electricity.

The 530-square-kilometre piece of land currently disturbed by the oilsands (which is smaller than the John F. Kennedy Space Center at Cape Canaveral , Fla. at 570 square kilometres) must be reclaimed by law and  will return to Alberta 's 381,000 square kilometres of boreal forest, a huge carbon sink.

Quebec , of course, has clean hydro power, but more than 13,000 square kilometres were drowned for the James Bay hydroelectric project, permanently removing that forest from acting as a carbon sink.

But Fairy Godmother is digressing all over the place. While the oilsands only produce five per cent of Canada 's GHGs, it contributes much more to Canada 's economy. After all, oil and gas make up one-quarter of the value on the TSX alone. Alberta is also the largest net contributor per capita by far to Confederation and there are only two more -- B.C. and Ontario .

Quebec hasn't made a net contribution to the rest of Canada for a very long time. This is not to be critical (after all, Fairy Godmothers never criticize), it's just a fact. In 2009, Albertans paid $40.46 billion in income, corporate and other taxes to the federal government and received back just $19.35 billion in services and goods from the feds. That means the rest of Canada got $21.1 billion from Albertans or $5,742 for each and every Alberta man, woman and child. In 2007 (the last year national figures are available), Alberta sent a net contribution of $19.49 billion to the ROC or $5,553 per Albertan -- more than three times what every Ontarian contributes at $1,757. Quebecers, on the other hand, each received $627 net or a total of $8 billion, money which was designed to help "equalize" social programs across the country.
Except, that's not what is happening. Quebec has more generous social programs like (nearly) free university tuition (paid for mostly by Albertans) and cheap provincial day care (paid for mostly by Albertans).

But in this Fairy Godmother world, poof, those delightful unequal programs have now disappeared! Quel dommage! 

The July 2009 Canadian Energy Research Institute (CERI) report states that between 2008 and 2032, the oilsands will account for 172,000 person-years of employment in Ontario during the construction phase, plus 640,000 for operations over the 25-year period. For Quebec, the oilsands will account for 84,000 person-years of employment during the construction phase, plus 292,000 for operations over the 25-year period.

In total, the oilsands are expected to add $1.7 trillion to Canada 's GDP over the next 25 years.

Wave wand and Poof, Jobs, gone! So, now that the oil industry has shut down and left Alberta , Alberta has become a have-not province and so has every other province. Equality at last! Hugo Chavez will be so pleased.

Meeting our Copenhagen targets suddenly looks possible, as most of us can't afford to drive our cars or buy anything but necessities, so manufacturers have closed their doors and emissions are way down.

The dream of many Quebecers to form their own nation and separate from Canada has died at last. Alas, in Alberta , separatist sentiment has risen dramatically, citizens vote to separate and the oil and gas industry returns.
Albertans start to pocket that almost $6,000 for each person that used to get sent elsewhere and now their kids get free tuition. Fairy Godmother's work is done. Wish granted. Quebecers must now sign up for a foreign worker visas to work in Alberta to send their cheques back home so junior can start saving up to pay for college.

Licia Corbella is editorial page editor of The Calgary Herald.

Please keeps this message going, forward to as many as possible.



Energy & Commodities

Byron Wien Speaks To The Smartest Man In Europe - A Must Read

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Posted by Byron Wien via Business Insider

on Wednesday, 04 July 2012 07:39

Blackstone's Byron Wien is up with a new blog post, wherein he relays a conversation he had with someone he only refers to as The Smartest Man In EuropeBusiness Insider Say's what he has to say is Terrifying

Wien doesn't say who The Smartest Man In Europe is, but describes him as basically an incredibly brilliant, wordly, rich businessman.

So what does TSMIE see now? 

Basically that massive amounts of debt will bring the decline of Western Civilization, but that in the meantime, before that happens, policy makers would pull every trick they could in order to stave off a catastrophic event. 

After getting to the point where fiscal stimulus no long works, the world's central banks will go into overdrive (as is already happening)

Be sure to read "“So what am I doing with my money?", his conclusion in the second last paragraph HERE



Energy & Commodities

Big Profits Dead Ahead: $115 oil by the year end says T.Boone Pickens

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Posted by T. Boone Pickens via Bloomberg

on Tuesday, 03 July 2012 00:00

One of the most famous oil price forecasters BP Capital’s T. Boone Pickens talks about the prices for natural gas and oil. He speaks with Trish Regan on Bloomberg Television’s ‘Street Smart.’

For Mr Pickens sub-$100 oil prices for Brent Crude marked the bottom of the sell-off and the only way is up, though he sees the US president manipulating the WTI price with the release of strategic reserves this autumn. Brent Crude is broadly the price the Middle East earns from exports.

oildrummoney 0


Energy & Commodities

Dr. Copper says watch out below

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Posted by A Sober Look

on Sunday, 01 July 2012 06:26

The dislocation between US equities and Brent crude (chart below and discussed there) is by no means unique. A very similar picture is developing between S&P500 and copper. And as with oil, one can blame it on supply fundamentals, but the reality has more to do with a sharp deterioration in global demand as world economies slow.

Miller Tabak : - Traders often refer to the red metal as Dr. Copper because it is the only one that has a PhD in economics, and tends to be a great leading indicator of economic conditions. If you follow that thesis, and go by recent trends, Copper could be telling an ugly story for equities. 
Copper first bottomed in December 2008, while the S&P waited until March 2009. In 2010, Copper made its low for the year in June, vs. July for the S&P. The 2011 peak in Copper was February, vs. May for the S&P. 2012 is almost identical to last year, with Copper again topping out in Feb., while the S&P made its high in March. There are no guarantees that Copper will make a new low for the year, and even if it does that equities will follow, but it certainly bears watching given the historical significance of the relationship.
Copper vs SP500
The dislocation between US equities and Brent crude (discussed here)
US crude stocks
....more articles at Sober Look


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