Energy & Commodities

China’s Oil Imports From Iran Reduced Again

oil-barrels

 

China has stepped up the pressure on Iran in the face of Europe’s oil embargo. China will reduce its crude oil imports from Iran for a third month, sources said today, as the two remain divided over payment and price terms, although they plan to meet again for talks as early as this week.

 

China is the top buyer of Iranian oil and also the fastest expanding major oil importer, putting it in a strong position to negotiate for better terms after it more than halved imports for both January and February.

The reductions for March-loading supplies will be largely the same, if not deeper, than the previous two months, industry officials with direct knowledge of the supply situation told Reuters.

 

China, which buys around 20 percent of Iran’s total crude exports, cut its January and February purchases by about 285,000 bpd, just over one half of the total average daily amount it imported in 2011.

 

Spotlight China: Electricity Consumption Drops Sharply; Central Bank Vows Housing Support; Asia Real-Estate Bull Turns Bearish HERE

 

BlackRock, Fidelity Bullish on Corporate Bonds

BlackRock Inc., Fidelity Investments and Charles Schwab Corp., which together manage more than $5 trillion, are all bullish on corporate debt.

 

The Federal Reserve’s pledge to keep interest rates at a record low through late 2014 means investors should take advantage of the extra yield, or spread, offered by asset-backed securities, commercial mortgage-backed debt and high-yield bonds in the U.S., according to BlackRock. It’s favoring securities due in five years and less, said Rick Rieder, chief investment officer for fundamental fixed-income portfolios for the company, which has $3.51 trillion in assets.

 

“One of the ways to take advantage of fixed income is to buy spread assets,” Rieder said yesterday in an interview from London. Yields on short- and medium-term Treasuries are “going to be very low for a long time.”

 

Dow Jones Corporate Bond Index

 

Corporate bonds (Dow Jones Corporate Bond Index chart above)  are outperforming U.S. government securities this year as the world’s biggest economy shows signs of growth. Treasuries have returned 0.3 percent, versus 2.4 percent for company debt, according to Bank of America Merrill Lynch indexes. 

 

….read more HERE

Here’s Why It May Be Time To Think Defensively

  It seems like everyone loves the stock market these days. The S&P 500 is off to the races this year. Only a handful of years throughout history compare to the index’s 7.1% surge to kick off 2012.

 

BlackRock chieftan Larry Fink says asset allocation should be steered toward 100% equities. No questions asked. Even Dr. Doom is less gloomy than he’s been in the past.

 

Has everyone gone mad?

 

Cyclicals have led this year’s rally, with financials jumping 13%, materials surging 12% and tech stocks advancing 11%.

Screen shot 2012-02-09 at 12.27.03 AM

While the rally doesn’t look like its petering out anytime soon, Barry Knapp at Barclays Capital offers some reasons for caution. 

 

….read it all HERE

Commodity price risk that is now to the upside and Barclays Capital analysts believe that 2012 is going to be a good one for producers of industrial metals and precious metals, Kevin Norrish, the bank’s managing director of commodities research told the Investing in African Mining Indaba here Monday.

 

The result will be gold trading above $2,000 an ounce, copper trading consistently above $9,000 a tonne by the second half of the year and platinum by the four quarter averaging somewhere around $1,800 an ounce, he said.

 

“The speed with which prices fell in the latter part of 2011 was very reminiscent of the speed at which prices were falling in 2008 and 2009,” he said. “So a lot of people say we’re coming into 2012 with the risks very clearly to the downside. I would disagree with that. Certainly our view is that 2012 is going to be a good year for commodities prices and it’s going to be a particularly good year for base and precious metals, In fact the risks are very much tilted to the upside.”


….read more HERE

Canada’s Housing Bubble Is Stretched to the Limit

Houses-NewZealand

 

Vancouver the second least affordable city in the World. But perhaps the biggest sign of a Canadian housing bubble is debt. The average debt burden of Canadian families stands at a remarkable 153 percent of disposable income—and growing. If the bubble bursts millions of Canadians will be left paying a fixed mortgage on a rapidly depreciating asset that will destroy their financial lives.

 

Canada’s Housing Bubble Is Stretched to the Limit


Do the math: If you earned a salary of $50,000 per year, and bought an average house, it would cost almost $300,000 (in Regina a 900sq ft house built on a small lot in the 1930’s goes for more than $200,000). In Canada, this salary puts you in the 20 percent tax bracket. That means you really only bring home $40,000 per year, or $3,300 per month.

 

Now look at your mortgage costs. A 4.5 percent, fixed-rate, 30-year mortgage has a monthly payment of $1,520 per month. Almost half your total income goes to paying just the mortgage. That’s why the mortgage industry started providing zero-down 40-year loans, before the federal government banned them for being too risky for consumers.

 

If you are like many people, and don’t have a 20 percent down payment, you will need to buy mortgage insurance. Estimate another $250 per month if you have close to 20 percent. If you only put down 5 percent, you will need to cough up closer to $700 per month.

 

Then there are property taxes: Add at least another $500 per month. Property insurance: Another 250 per month.

 

You haven’t even begun to consider upkeep costs, or home owner’s association fees, and you are already paying $2,520 per month. If you only put 5 percent down, you would be paying $2,970 per month. That would leave you a miniscule $330 per month, all of which would probably be needed to pay utilities.

 

….read it all HERE

SIGNS OF THE TIMES

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The following is part of Pivotal Events that was

published for our subscribers February 2, 2012.

SIGNS OF THE TIMES:

“Take Federal bailout money, watch your company’s stock fall 90%, become a Co-Chair of Davos”

– Bloomberg, January 20

The headline was referring to Citigroup CEO Vikram Pandit.

“Junk-bond trading volumes are rebounding to the highest levels in 11 months – optimism.”

– Bloomberg, January 27

“Societe General SA and Credit Agricole SA were among French banks to have their credit grades cut by Standard & Poors.”

– Bloomberg, January 24

“The IMF cut its forecast for the global economy as Europe slips into recession.”

– Bloomberg, January 24

*   *   *   *   *

STOCK MARKETS

The best January for the stock markets in years has restored their popularity. Bullish comments include low P/Es and attractive dividend yields as well as favourable comparisons to bond yields. Not to overlook outstanding earnings gains.

In our dispassionate approach this is considerably different to conditions in early October. Choppy action, but rising until around January was possible and couple of weeks ago we thought it could continue into February.

The February 24th ChartWorks “Complacency Abounds Oh-Oh!” outlined the probability of a top within the next four weeks.

The surge out of mid-December has been exciting enough to register some cautionary alerts and last week we were looking for some “key” technical excesses. The S&P has since reached 73.3 on the daily RSI and this compares to 70 reached with the high of 1370 at the end of April. That was on the speculative surge that out proprietary Forecaster expected to complete in that fateful April.

Stock markets are poised to roll over. If so, the latest rally is a test of the April high which we considered the cyclical best of the first bull market out of the crash.

Credit Markets

The demand for risk continues with favourable action in corporate and municipal bond markets. Yields for the Italian ten-year keep going lower and after registering scary headlines last week even the Portuguese bonds are declining in yield.

Sub-prime mortgage bonds have rallied in price from 38 in October to 51.6 – that’s up a little more than half a point from last week.

Money market stuff such as the Ted-Spread started to narrow at the end of December.

To Ross’s “Complacency Abounds” in stock market volatility we would add that it is abounding in the credit markets as well.

Fortunately, we may have an exit indicator.

The action in municipals (MUB) has been good enough to register an Upside Exhaustion. The price could roll over within a couple of weeks and the change could be part of a general reversal in risk products. This will likely show up in the reversal in the stock market VIX.

Long-dated treasuries are working on a big top. Within this the final rally has been likely to occur as the excitement in stocks and commodities fades.

This has taken the bond future from the 140 level to the 145 level. The high was 146 in December.

Currencies

Ross targeted the decline in the US dollar index to around 78.8 and so far it has bounced off this level a number of times. With this, the Canadian made it up to 103 (briefly). It is now vulnerable to a decline in commodities.

 

 

Link to  February 3, 2012 ‘Bob and Phil Show’ on TalkDigitalNetwork.com:

http://talkdigitalnetwork.com/2012/02/jobs-boom-stocks-pop/

 

 BOB HOYE,   INSTITUTIONAL ADVISORS

E-MAIL  bhoye.institutionaladvisors@telus.net“>bhoye.institutionaladvisors@telus.net