Thursday, September 29, 2016

Finally, agreement in Algeria: Crude Oil soaring

Negative interest also in Germany

The market today woke up with its usual indecision of these days, pending Germany and oil. Today Germany placed negative rate bonds -0.7%, the new 'fashion' of the global central banks. Those who buy these types of bonds do so, only to sell them immediately at better prices (that is, to an even lower yield) ... a chain, which may end badly at some point. For a change, the Deutsche Bank DB shares rose today on the upside, based on rumors of probable government aid to its star bank, which I comment below. A section: about the negative interest rate, read this article of Salmon Blog, in the following link, it explains it very didactically.

Finally, agreement in Algeria: Crude Oil /CL soaring

Tremendous hike yesterday in the crude oil /CL. When I finished at noon of publishing my daily post came the news of the agreement in Algeria, and that's why that update. Yesterday's close of almost +5%, very slight rise today at the beginning of the session: there are doubts about the real scope and application of the production freezing agreement. We already know that between Arab countries and the Middle East there are always tensions and they are unclear many times. And sometimes they do not fulfill the stipulated, but see the following graph taken from Bloomberg.

Since 1998, OPEC does not usually meet the production quota agreed (in black): usually exceeds it (in blue).

I see difficult the explosion of the price of oil as some thought yesterday, but until the picture becomes clearer, although with the volatility that has been dragging the price of crude for weeks, you can not predict anything. Their variation will depend on the weekly reserve data and hence some new concrete statement from OPEC, which can be given at any time, although only on November 30 that they meet again in Vienna.

It forms an Inverse Head and Shoulder in /CL, with an increase in volume. 
Watch out if the price crosses the neckline (and there is no news that alters its rise).

German Rescue Plan for the Deutsche Bank $DB ?

I have been following closely everything that happens with the Deutsche Bank DB. The last thing yesterday were the rumors that, in fact, despite what was denied a few days ago by Merkel, her government may have a rescue plan ready for the powerful bank. It seems to be politically correct to do so, since the Americans did the same with their banks after the 2009 crisis, that precedent exists and would not be criticized by the global financial status quo. Yesterday the stock rose more than 3% based only on the rumor of the rescue. Only if it is confirmed, with an official declaration, would it be a reason to enter long in DB.

It does not prove anything, but it's just terror: see the behavior in recent years of DB 
compared to that of Lehmann Brothers in 2006 to 2008, the year of its bankruptcy.

The Recommended Reading

Regarding Trump's comment on Wall Street on the day of the debate, literally: 'Believe me, we are in a bubble right now, and the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that's going to come crashing down. We are in a big, fat, ugly bubble, 'I have not found (nor will I find) any recognized federal, banking or investor official from the United States who thinks in that sense.

And many of us who followed the stock market years ago, we know that Trump did not tell any lie. It is clear, and I also, that the stock market is being artificially supported by the political class, through its Central Bank, to keep the average American happy. It is the usual modus operandi of the Democrats (read Bill Clinton). His government generated the dot com bubble in 1999, which degenerated over time in the real estate bubble of 2008, and which in turn has led to the current one, that of the bonds, that if the correct monetary policy is made, I hope it does not burst.