Izabella Kaminska
Dark inventory, a volatility shock absorber
From oil to copper, something strange is going on with commodity inventories.
Official stocks are rising across numerous commodities, but analysts and traders swear fundamentals remain tight, while prices stay supported:
Where have all the oil hedgers gone?
An interesting chart from John Kemp at Reuters on Monday (click to enlarge):
The chart breaks out which players are net short or long of Nymex and Ice light sweet oil at any particular time.
The groups are defined by the CFTC and consist of five main categories:
A palm oil storm in the making
Looking for supply headwinds in obscure commodity markets?
Then look no further than the global palm oil market.
According to Standard Chartered a storm is brewing due to a severe structural slowdown in output and the analysts are pretty bullish as a result:
Famous last words, Spanish edition
History is scattered with examples of hubris.
Take the story of King Croesus of Lydia who arrogantly asked the well-known wise man Solon the Athenian who he believed to be the happiest man in the world,
The (early) Lunch Wrap
Good morning, New York…
FT ALPHAVILLE
That Fed Comms problem: Cardiff highlights that an interesting discrepancy has appeared in the Fed’s most recent communications. While the statement was dovish,
Another repeat from the BoJ
We love the BoJ’s no-nonsense approach to amendments. If you’re doing something wrong, or not doing enough, just cross it out and change it:
So what’s behind the largely expected decision to boost asset purchases to 40 trillion yen from 30 trillion yen?
Just Japan’s endless battle with deflation.
Deutsche the flow monster – it’s alive!
Arguably THE banking factoid of the year, by way of Espirito Santo’s review of Thursday’s Deutsche Bank conference call (see bold):
The conference call provided the first clear indication from management that reduced capital allocated to trading operations is impacting trading revenues in the IB.
China is being buried alive in copper
According to Wikipedia, compulsive hoarding is a disorder characterized by the excessive acquisition and inability or unwillingness to discard large quantities of objects that would seemingly qualify as useless or without value.
Further reading
Elsewhere on Thursday,
- For Frack’s sake.
- A portrait of Rupert Murdoch by Adam Curtis.
- The Credit Suisse derivative on its own derivatives, which Credit Suisse wrote to itself.
- When is a scoop non-pubilc information?
- New insights into the multiplier effect.
Saudi oil puzzle, continued
From the commodities research team at Goldman Sachs on Wednesday:
Saudi Arabian crude oil inventories built by 35.4 million barrels in the December-February period, adding 390 thousand b/d to world oil demand,
Glencore, an investigative report
Kudos to Foreign Policy for spending a year investigating Glencore.
Did you know, for example, that the name “Glencore” comes from: GLobal ENergy COmmodities and REsources? According to Foreign Policy,
The unwitting move towards a global gold standard
Professor Lew Spellman, from the McCombs School of Business at the University of Texas at Austin, has posted on on what he calls gold’s changing role in the global economic landscape.
Amongst other things,
The 21st century hedge
The recent coverage of JP Morgan’s credit derivative ‘whale’ trade — supposedly a market hedge rather than directional position for the bank — has seen many financial pundits wonder how it could be that JP Morgan has a short position on any of the underlying names in the credit against which it is supposedly selling protection?
The index is made up of 121 North American companies,
The (early) Lunch Wrap
Good morning, New York…
FT ALPHAVILLE
Glencore gets Panorama-ed: Kate draws attention to John Sweeney’s report in the Guardian, ahead of the BBC’s Panorama programme on Monday which is set to broadcast a report on alleged links between Glencore’s operations in the Democratic Republic of Congo,
Is China at it again?
Sean Corrigan at Diapason Commodities has sent us another fascinating chart. It shows the hot money inflows into China which are unaccounted for by the sum of the trade balance, FDI, interest earned and FX revaluations.
Banks as volume gobbling monsters
Tabb’s latest statistics on US equity volumes are really raising some eyebrows, and not just because of the share of trade heading to the old bogey man the “dark pool”.
Nope. We’re talking about the share being gobbled up by banks and broker dealers direct.
Stardate April 13, CIO sector, JP Morgan reporting VaR
Big hat tip to @tracyalloway for flagging up the following factoid from JP Morgan’s earnings today.
Can you believe that VaR (value-at-risk) at JPMorgan’s investment bank was less than VaR at its much talked-about chief investment office (CIO) in the first quarter:
Further reading
Elsewhere on Friday,
- Regional tensions are rising in Spain.
- Especially as cash transactions in excess of €2,500 have been banned.
- Is it better to charge or subsidise credit risk?
- Paul Krugman scratches his head on safe assets.
The Swiss boson
The Swiss boson is a hypothetical condition which is supposed to account for why the Swiss franc has ‘mass’ when all other neighbouring currencies don’t.
A multi billion-euro experiment, operated by BERN (but funded outright by tax payers),
Huddle, huddle, toil and (legal) trouble
From the SEC on Thursday:
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are,
The (early) Lunch Wrap
Good morning, New York…
FT ALPHAVILLE
A ‘light sheen’ at Shell: Uh oh. There’s been something of a scramble for Shell in the Gulf of Mexico. The oil major has dispatched aerial monitors and an oil-spill response vessel to investigate a “light sheen”
Further reading
Elsewhere on Thursday,
- Is France peripheral, or part of the struggling core?
- 33 years (!)
- ZIRP till 2015?
- Don’t put all your eggs in one basket, regulator edition.
- Zurich, we have a problem.
Money as maturity and asset transformation
Just when you thought no more could be written about collateral, shadow banking and repo, Manmohan Singh and Peter Stella come together to bring us a new paper on the core essence of money and collateral.
When the tail-event becomes the standard risk
If anyone can bring metaphor and illustration to the market in volatility, it’s Chris Cole at Artemis Captial Management, a volatility-focused investment firm.
Take the intro of his latest note as an example:
These are the voyages of the JP Morgan CIO
Bruno Iksil — a.k.a Voldemort — coverage at Bloomberg is getting a tad, should we say, compulsive.
The latest follow up sees the news agency trawling through the LinkedIn profiles of JP Morgan’s Chief Investment Office employees in an attempt to figure out exactly what the office does.
The SNB as victim of a decentralised market structure
Thomas J. Jordan, vice chairman of the governing board of the Swiss National Bank, has made some interesting comments about last week’s sub 1.20 Swiss franc trade against the euro:
What precisely occurred last Thursday? Within just a few seconds,
Is the Aussie dollar becoming a reserve currency?
The IMF’s latest quarterly update on the currency composition of official foreign exchange reserves (COOFER) is out. One person excited by the numbers is Simon Derrick at BNY Mellon.
But not with respect to what they say about the share of global US dollar reserves,
Floored, but not unfloored
So…this is a follow up on the apparent collapse of the SNB’s 1.20 floor against the euro earlier this Thursday.
Whilst the Reuters chart we presented shows that the EUR/CHF rate did fall through 1.20,
The Swiss franc floor is under attack
There’s been some exciting action in the CHF/EUR cross in the last few minutes:
Looks like the SNB’s Swiss franc floor, which was set at 1.20 to the euro back in September 2011, is finally being tested by the market.