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26 November 2019
Video commentary for November 25th 2019
Eoin Treacy's view
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: trade tensions ease as Hong Kong democrats taste electoral success, Wall street breaks out following by small/mid caps, oil steady, gold and silver ease, copper quiet and Dollar steadies.
Hong Kong's Pro-Democracy Forces Win Landslide, Rebuking China
This article by Julia Fioretti, Iain Marlow and Fion Li for Bloomberg may be of interest to subscribers. Here is a section:
Pro-democracy candidates won 86% seats of the 444 seats counted as of 9 a.m., official results showed, with eight seats still up for grabs. In the last election in 2015, they had won about a quarter of all seats. The pro-government camp won about 12% of seats this time around, versus 65% four years ago. The vote saw record turnout of 71%, with more than 2.94 million people casting ballots -- roughly double the number in the previous election.
The vote came at a time of unprecedented political polarization in the city, with divisions hardening as the protests become more disruptive and the government refuses to compromise. While the district councils are considered the lowest rung of Hong Kong’s government, the results will add pressure on the government to meet demands including an independent inquiry into police abuses and the ability to nominate and elect the city’s leader, including one who would stand up to Beijing.
“The government respects the results of this election,” Chief Executive Carrie Lam said in a statement on Monday. “I am aware there’s lots of analysis about the results among the community, which said the results are a reflection of the public’s dissatisfaction towards the current situation and deep-seated problems in society. The government will listen to the public’s feedback with humility and reflect on it.”
Eoin Treacy's view
The success of pro-democracy candidates in the Hong Kong election puts to rest any argument the protests were not widely supported by the community. The challenge for protestors now is the absence of any real power for those elected.
Why the Narratives around Oil Supply and Demand are Wrong
This article by Goehring & Rozencwajg may be of interest to subscribers. Here is a section:
Investors remain very concerned about the impact of slowing economic growth on global oil demand. While Q2 did show some softening, there have been several very bullish developments that most investors seem to ignore. For example, analysts focused all of their attention on the IEA’s recent downward revision of 2020 global demand projections by 100,000 b/d over the course of the last three months. However, at the same time, the IEA quietly revised historical demand higher by 190,000 b/d in 2017 and 110,000 b/d in 2018–a fact that few people wrote about. Notably, Q4 of 2018 was revised higher by a very large 300,000 b/d.
Our models tell us that more revisions are forthcoming. As always, our analysis revolves around the “missing” barrels. For example, the IEA still claims after its latest set of historical revisions that global demand for all of 2018 equaled 99.3 mm b/d while total supply equaled 100.3 mm b/d. This suggests that inventories should have grown by 1 mm b/d or 365 mm b for the full year. Instead, the IEA reports that inventories were unchanged for the year. We refer to the “missing” barrels as oil that was produced but neither consumed nor put in storage. We have long argued that “missing barrels” are a clear indicator that the IEA will revise higher its demand figures and once again that has been correct.
The IEA has a long history of demand underestimation. In eight of the last nine years, they have been forced to revise global demand higher by 1.1 m b/d on average (a number that is creeping higher). Despite this chronic underestimation and the continued presence of “missing barrels,” investors continue to ignore the warning signs of stronger than expected demand.
Eoin Treacy's view
The backwardation in the oil price curve suggests at least a near-term supply deficit relative to demand. That has been created either by the slowdown in the global economic which could have impacted demand growth or it is a combination of factors like the reduction in OPEC and Russia supply and the slowdown in unconventional onshore US production. Regardless of the argument, the backwardation doesn’t lie.
2020 Outlook What Investors Are Saying
Thanks to a subscriber for this report from Michael Wilson for Morgan Stanley. Here is a section:
Eoin Treacy's view
A link to the full report is posted in the Subscriber's Area.
It takes all kinds of views to make a market and that is particularly true when supply and demand have been in relative equilibrium for almost two years. When that amount of time has passed both the bullish and bearish arguments are well understood.
Eoin's personal portfolio: precious metals long initiated
Eoin Treacy's view
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.