Ritholz interviews Jeff Sherman, Doubleline

by Jim Colburn • Monday, December 18, 2017

Ritholz interviews Jeff Sherman, and it’s excellent!

http://ritholtz.com/2017/12/transcript-mib-interview-jeff-sherman-doubleline/

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Volatility is dead everywhere… Daily Shot… WSJ

by Jim Colburn • Monday, December 18, 2017

The WSJ’s Daily Shot shows volatility declining across the board…  Here is a measure of vol for various asset classes:

 

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Ben Eisen, WSJ, on the yield curve…

by Jim Colburn • Monday, December 18, 2017

Here Ben Eisen at the  Wall Street Journal on the flattening yield curve:

”Long-term yields tend to go up and down alongside expectations for growth and inflation, while short-term yields tend to rise when the Federal Reserve raises rates. A low long-term yield, especially at a time of rising short-term rates, is thought to be a sign of caution. And when long-term yields dip below their short-term counterparts in what’s known as an inverted yield curve, it has reliably indicated a coming recession.”

Here is Janet Yellen’s take:

””There is a strong correlation historically between yield curve inversions and recessions,” said Fed Chairwoman Janet Yellen at a press conference Wednesday. “But let me emphasize that correlation is not causation, and I think that there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed.””

 

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Q4 GDP Forecasts… Calculated Risk

by Jim Colburn • Friday, December 15, 2017

Bill McBride at Calculated Risk summarizes 4Q GDP expectations:

“From Merrill Lynch:
The strong retail sales data provided a 0.3pp boost to our 4Q GDP tracking estimate, bringing it up to 2.4%.

From the Altanta Fed: GDPNow
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 3.3 percent on December 14, up from 2.9 percent on December 8. The forecast of fourth-quarter real consumer spending growth increased from 2.5 percent to 3.2 percent after [the] Consumer Price Index report from the U.S. Bureau of Labor Statistics and [the] retail sales release from the U.S. Census Bureau.

From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 4.0% for 2017:Q4 and 3.1% for 2018:Q1.

CR Note: It looks likely that GDP will be over 3% again in Q4.”

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Wall Street Wises Up to the Folly of Forecasting… Bloomberg

by Jim Colburn • Friday, December 15, 2017

Barry Ritholz at Bloomberg takes down economists’ forecasts:

“One economist says what should be obvious: Making predictions only means you will be either wrong or lucky.”

”No one put this any better than 19th century novelist William Gilmore Simms, who observed “I believe that economists put decimal points in their forecasts to show they have a sense of humor.”“

 

 

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Top ten producers… EIA

by Jim Colburn • Friday, December 15, 2017

From Today in Energy:

The article is actually about the increase in production from Brazil’s pre-salt regions:

”Pre-salt resources were first discovered in Brazil’s offshore Santos Basin in 2005 by state-controlled Petrobras, the dominant participant in Brazil’s oil sector. Further exploration in the Santos, Campos, and Espirito Santo basins revealed an estimated 5 billion to 8 billion barrels of oil equivalent in a pre-salt zone 18,000 feet below the ocean surface.”

 

 

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OPEC vs. IEA, dueling forecasts… Bloomberg

by Jim Colburn • Thursday, December 14, 2017

The IEA and OPEC released their monthly situation and outlook reports this week… Here is Bloomberg on how they differ:

“They live in the same world for the first half of 2018, but divorce into separate universes for the second half,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. “OPEC believes in strong growth of oil demand; the IEA believes in strong growth of non-OPEC supplies.”…

“While OPEC expects rival supplies to expand by 1 million barrels a day next year, the IEA forecasts non-OPEC to grow by 1.6 million a day. The difference partly lies in their conflicting views of the supply source that unleashed the glut OPEC is now battling to clear: U.S. shale oil. OPEC boosted estimates for U.S. crude production this week and now sees an expansion of 720,000 barrels a day next year. Still, the IEA’s forecast is about 20 percent higher.”

Here is the difference in expected stock draws/builds:

 

 

 

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The Jones Act Serves No Purpose…. Blooomberg

by Jim Colburn • Thursday, December 14, 2017

Do read the whole thing here

”In 1960, there were nearly 3,000 U.S.-flag oceangoing vessels — 17 percent of the world fleet. By 2016, there were 169 such ships — less than one percent of the global total. And of those, just 92 were Jones Act vessels carrying cargo between U.S. ports.”

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Total supply growth could exceed total demand growth…. IEA

by Jim Colburn • Thursday, December 14, 2017

Here is the IEA from this month’s Oil Market Report released today:

“On considering the final component in the balance – non-OPEC production – we see that 2018 might not be quite so happy for OPEC producers. Just as the OPEC oil ministers were sitting down in Vienna, our colleagues at the US Energy Information Administration released data showing that for September US crude oil output increased month-on-month by 290 kb/d to reach 9.48 mb/d, the highest monthly average since April 2015 and 928 kb/d above a year ago. Preliminary weekly data suggests that US production increased further into early December. Recently, US drilling activity and well completion rates have picked up again, suggesting higher production to come in a few months. Consequently, we have raised our annual growth forecast for total US crude oil to 390 kb/d this year and 870 kb/d for 2018. Impressive though this seems, according to recent investor updates, the new mantra in the US shale regions is “moderation”, reflecting a desire to greet stronger prices as an opportunity to consolidate rather than to launch yet more headlong expansion. The flexibility and ingenuity of the shale sector raises challenges to forecasters. Even so, when our US outlook is added to expectations for the other producers, output from non-OPEC countries could rise by 1.6 mb/d in 2018, an increase of 0.2 mb/d to our forecast in last month’s Report.

So, on our current outlook 2018 may not necessarily be a happy New Year for those who would like to see a tighter market. Total supply growth could exceed demand growth: indeed, in the first half the surplus could be 200 kb/d before reverting to a deficit of about 200 kb/d in the second half, leaving 2018 as a whole showing a closely balanced market. A lot could change in the next few months but it looks as if the producers’ hopes for a happy New Year with de-stocking continuing into 2018 at the same 500 kb/d pace we have seen in 2017 may not be fulfilled.”

Here is the supply/demand chart showing balance:

Using the CBOE’s oil volatility index Barchart shows vol near the low for 2017:

 

 

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US inventories compared to 5 year average… EIA

by Jim Colburn • Wednesday, December 13, 2017

These charts from the EIA’s This Week in Petroleum compare current stock levels to the 5 year range:

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