Baltic Dry Index. 757 +06 Brent Crude 25.43 Spot
Gold 1690
Coronavirus Cases 21/4/20
World 2,489,041 Deaths 171,396
J. K. Galbraith. The Great Crash: 1929.
Nothing
works anymore! We are deep into a scary new surreal world. After negative
interest rates, negative US oil prices! Anyone still long US oil fracking
stocks?
According
to some sources, half of Los Angeles is now unemployed!
Get
ready for some seriously weird times ahead. A massive tsunami of corporate and
individual bankruptcies is fast approaching, yet the sirens aren’t sounding, and
most people and market traders are still going about like we are still in early
February 2020. I think I know how Noah felt.
Below,
our ever more bizarre financial/business world. Get physical gold if you can
find any. It seems to have disappeared, which is worrying in itself! A gold squeeze
next?
Short
term, nothing good lies ahead. These are far from normal times! Perhaps the
Fedsters should be buying oil, but lacking Fedster oil tanks where would they
put it? It’s not like fiat money, created out of nothing and parked forever in
over priced stocks.
Dow futures retreat after historic plunge in oil; IBM shares set to fall after earnings
By William Watts Published: Apr 20, 2020 4:46 pm ET
Oil just did something that made even market veterans shake their heads
in wonder — the soon-to-expire May contract for West Texas Intermediate crude
on the New York Mercantile Exchange traded, and closed, in negative territory.
“I’m not sure how to react to that other than say that nobody, whether
they’re 120 years old or whether they’re 20 months old, has ever seen an oil
price lower than this,” Tom Kloza, a 40-year market veteran and head of global
market analysis for Oil Price Information Service, told MarketWatch just
minutes before the market closed on Monday.
The negative finish means the holder of a long position would be
required to pay someone to take that contract off of their hands. Negative oil
prices would seem to be a foreboding sign about the outlook for an economy
kicked in the teeth by the COVID-19 pandemic. It would also seem, at first
glance, to point to ever-cheaper gasoline prices at the pump — a potential
positive for hard-hit consumers.
The move was certainly emblematic of a historic bear market for oil,
which has been sunk by the collapse of demand as a result of coronavirus
outbreak and a brief but ugly price war between Saudi Arabia and Russia that
added even more crude to an oversupplied market. But it also represents a
phenomenon characteristic of futures markets, where wild price swings — albeit
perhaps never on Monday’s scale — can occur around contract expirations.
----
The May WTI crude contract CL CLK20+104.38% closed Monday at -$37.63 a barrel, a one-day drop of $55.90,
or 306%, according to Dow Jones Market Data. The May contract expires at
Tuesday’s close. Any traders that are still long crude at that time must take
physical delivery, while anyone short must make delivery.
What happened Monday in the futures market was effectively the opposite of so-called short squeeze, a phenomenon that may be more familiar to investors. In a short squeeze, traders that are short the market fear they will be unable to find the underlying physical commodity and are forced to cover their positions, driving prices up sharply.
On Monday, traders with long positions scrambled to get out amid a fear that it would be difficult to find a place to park physical oil amid a rising glut of crude. So in a way, Monday’s price action, while certainly bearish, was also something peculiar to the futures market, with the action in the May contract not necessarily an accurate reflection of supply and demand fundamentals.
Indeed, crazy things — albeit not this crazy — sometimes happen when a futures contract moves into expiration. The heaviest trading volume and positioning had long since moved to the June contract CLM20+4.89% , which will become the front month when the May contract expires Tuesday.
The June contract on Monday fell $4.60, or 18%, to settle at $20.43 a barrel. That also marked a further move into what’s known as “contango,” a condition in which future months trade at a premium to the spot price and the nearby contract. The premium of the next-month contract to the nearby contract was already trading at a record before Monday’s close.
Will
June suffer the same fate as the May contract in coming weeks? After all, the
physical market is weak with some grades of U.S. and Canadian crude trading
near zero ahead of Monday’s collapse, reports said.
---- Those storage considerations are front and center, with data showing a historic jump in U.S. inventories, including a sharp rise in Cushing, Okla., the delivery hub for Nymex futures.
“Supply is threatening to overwhelm storage in coming weeks, and the
flood of crude oil shows no signs of abating,” said Robert Yawger, director of
energy at Mizuho Securities USA, in a Monday note. If crude storage levels continue
to rise at their current clip, U.S. inventories will break their all-time
record in two weeks and reach maximum capacity in eight to nine weeks, he said.
More
April 21, 2020 /
6:04 AM
NEW YORK/HOUSTON
(Reuters) - The telephone lines have been ringing at Adler Tank Rentals in
Texas as oil companies found a new use for steel tanks that had been left idle
when shale producers stopped drilling - they want to use the tanks to store
some of an oil glut that has overwhelmed the market and flipped U.S. crude
prices negative for the first time.
Hundreds of millions of barrels of crude have gushed into storage
worldwide in the past two months as the coronavirus-related lockdowns wiped out
around a third of global oil demand.
With oil depots that normally store crude oil onshore filling to the
brim and supertankers mostly taken, energy companies are desperate for more
space. The alternative is to pay buyers to take their U.S. crude after futures
plummeted to a negative $37 a barrel on Monday.
A topsy-turvy market that has oil prices for October delivery at $31 a
barrel has oil firms anxious to sock away millions of barrels now to sell at a
profit later.
In Cushing, Oklahoma, home to dozens of large tank farms with combined
space for about 76 million barrels, operators are fully booked, said traders.
Storage there jumped by 5.7 million barrels the week before last, according to
the latest U.S. Energy Information Administration (EIA).
While the government estimated there is available space, traders said
Monday’s market drop indicated any unfilled tanks are under lease, and not
available to new renters.
---- The hunt for storage points to the magnitude of the collapse in demand for U.S. shale and the huge volume of unsold oil to refiners who are cutting purchases.
Last month, the Organization of the Petroleum Exporting Countries (OPEC)
and other producers including Russia threw in the towel on four years of
self-imposed output curbs that gave U.S. shale a price umbrella. The result was
a drop in U.S. oil prices to about $20 a barrel as Saudi Arabia and Russia
pledged to pump full bore.
For a time, it looked like prices would stabilize after the pair and
other nations this month agreed to deepen cuts. But crude stocks in the United
States rose by 19 million barrels overall the week before last, the EIA said,
the biggest one-week increase in history, setting the stage for Monday’s
historic decline.
----
In addition to the onshore glut, there are about 160 million
barrels of oil sitting on tankers waiting for buyers. And at least six crude
tankers carrying 2 million barrels apiece are en route to the United States
from Saudi Arabia, adding to the alarm at the U.S. Gulf Coast.
More
April 20, 2020 /
5:19 PM
LONDON (Reuters) -
British employers have put more than a million staff on temporary leave due to
the coronavirus, finance minister Rishi Sunak said, reporting a flood of
applications since the government’s costliest programme to support the economy
opened.
The scheme will pay 80% of employers’ wage bills until the end of June
for staff suspended during the coronavirus lockdown, and it received 140,000
applications from firms in the first eight hours it was open on Monday.
“The grants ... will help pay the wages of more than a million people -
a million people who if they hadn’t been furloughed would have been at risk of
losing their jobs,” Sunak said at the government’s daily news conference.
Businesses that apply by Wednesday should receive money before the end
of the month, when wages
are often due.
Sunak again refused to estimate the total cost of the programme, but the
government’s budget watchdog said last week it could reach 42 billion pounds
($52 billion) in just three months and cover 30% of the workforce.
This is based on the watchdog’s projection
that Britain’s economy will shrink by 35% during the three months to June due
to lockdown restrictions.
More
Bridgestone to suspend 11 Japanese plants during late April-early May
April 20, 2020 /
11:58 AM
TOKYO (Reuters) - Japanese tyremaker Bridgestone Corp (5108.T) said on Monday it
will suspend operations at its 11 domestic plants, including 8 tyre factories,
from late April to early May to cope with dwindling demand due to the
coronavirus pandemic. The world’s biggest tyremaker will shut the 8 tyre plants between April 29 and May 8, including its main passenger vehicle tyre factory in Hikone, western Japan and its main truck and bus tyre manufacturing plant in Amagi, southern Japan.
Bridgestone has a total of 15 plants in Japan, most of which make tyres
or other rubber products.
The company had planned to close the plants between May 3 and 6 for
Japan’s Golden Week holiday but decided to extend the period for the tyre
factories by 6 days as tyre demand for new vehicles, retail shops and exports
has been slowing, a spokesman said. The closure period for 3 other plants will
be extended by 2-4 days.
As of April 16, Bridgestone had suspended operations at 19 of its 51
overseas tyre factories to reflect weaker demand, the spokesman said.
Branson says Virgin Atlantic will need UK government help to survive
April 20, 2020 /
10:27 AM
LONDON (Reuters) - Virgin Atlantic will only survive the
coronavirus outbreak if it gets financial support from the British government,
the airline’s founder Richard Branson said on Monday. Virgin Atlantic last month asked the government for emergency financial help in addition to the coronavirus package made available to all British companies, but a deal has not yet been reached.
“We will do everything we can to keep the airline going – but we will need government support to achieve that in the face of the severe uncertainty surrounding travel today and not knowing how long the planes will be grounded for,” Branson said in a blog post to staff.
“This would be in the form of a commercial loan – it wouldn’t be free money and the airline would pay it back.”
Virgin Atlantic is based in the UK and is 51% owned by Branson’s Virgin group and 49% owned by U.S. airline Delta (DAL.N).
Branson, a billionaire, has come under fire from opposition Labour party politicians for asking for support at a time when Virgin Atlantic employees have taken a temporary wage reduction and much of the economy has ground to a halt.
Virgin Atlantic staff have taken a wage cut for eight weeks, which
Branson said was a “virtually unanimous” decision by employees and not forced
upon them by management.
“I’ve seen lots of comments about my net worth – but that is calculated
on the value of Virgin businesses around the world before this crisis, not
sitting as cash in a bank account ready to withdraw,” he said.
“Over the years significant profits have
never been taken out of the Virgin Group, instead they have been reinvested in
building businesses that create value and opportunities. The challenge right
now is that there is no money coming in and lots going out.
German engineering firms see bleak prospects for disrupted supply chains
April 20, 2020 /
11:45 AM
BERLIN (Reuters) - More than a quarter of companies in Germany’s
engineering sector do not expect the supply chain disruptions they are facing
as a result of the coronavirus pandemic to ease in the coming three months, the
VDMA industry lobby said on Monday.
The engineering industry umbrella group said that 89% of companies in
the sector reported having been hit by the pandemic, up 5 percentage points
compared to just two weeks ago. More than three-quarters of the sector’s firms
did not see any improvements to supply chain strains in the next three months.
“The situation in the machine tooling sector has deteriorated once again
as a result of the coronavirus pandemic,” the group said in a statement.
By Shawn Langlois Published: Apr 20, 2020
4:32 pm ET
Billionaire investor Howard Marks just told CNBC on Monday that “the world is more screwed up” than what the action in the stock market might lead you to believe.
Gary Evans of the Global Macro Monitor blog would agree.
“After the Fed effectively fully nationalized the financial markets by bailing out junk bonds on April 9th, turning Wall Street into a Soviet Sausage Factory, almost any type of analysis, which was on its way out anyway, was rendered completely meaningless,” he said.
But that didn’t stop Evans from offering up some analysis anyway.
“The market does appear to be looking forward to the other side,” he wrote in a blog post on Sunday. “What we are seeing scares the bejeezus out of us, however.”
And what he’s seeing is a valuation metric — Warren Buffett’s favorite — that is trading at its 94th valuation percentile even as “unemployment heads to the worst levels of the Great Depression, more than half of the Los Angeles workforce is unemployed, and uncertainty still reigns.”
Evans
pointed to a recent comment from Buffett’s right-hand man that shows how
hesitant the men behind Berkshire Hathaway BRK are in this climate.
“I would say basically we’re like the captain of a ship when the worst typhoon that’s ever happened comes,” Berkshire’s Charlie Munger said. “We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity. We’re not playing ‘oh goody, goody, everything’s going to hell, let’s plunge 100% of the reserves [into buying businesses].”
Read: Here’s the real reason why Buffett is sitting on all that cash
So, what is Evans doing to navigate this volatile market?
“This bounce is an incredible gift to rebalance, take some risk off, go to the virtual beach and wait this thing out,” he wrote. “Still sitting on the couch with cash and gold. We’ll let you trade the noise.”
Sitting on that “virtual beach” probably felt pretty good during Monday’s session, with the Dow Jones Industrial Average DJIA-2.44% closing down almost 600 points. The S&P 500 SPX-1.79% and Nasdaq Composite COMP-1.03% also finished firmly in the red.
Finally,
do global food shortages lie ahead?
With farmers and workers staying home either due to movement curbs or fears of being infected with COVID-19, the normal production capacities of farms and food processing factories have been reduced.
20 Apr 2020 06:13AM (Updated: 20 Apr 2020 11:02AM)
SINGAPORE: Across the Causeway, hundreds of melons have been left
to rot on the fields of fruit farms and tonnes more thrown in the dumpsters,
since Malaysia went into a lockdown on Mar 18 in response to a surge in
COVID-19 cases there.
Under the movement control order (MCO), which is now extended till
Apr 28, fresh markets and roadside stalls have been ordered to close, so
demand for fresh produce has dropped dramatically, farmers said.
Malaysian fruit farmer Toh Lee Chew said orders for his melons are down
50 to 70 per cent. Unable to find other ways to sell them, he has left the
melons to rot in the fields.
His brother Toh Lee Bing, who helps supply the fruits to markets and
fruit stallholders, said he has had to throw away 3 to 4 tonnes of fruits from
every lorry, even after donating whatever he can to charities.
The surplus situation is further exacerbated when Singapore went into a
“circuit breaker” on Apr 7. The number of lorries carrying fruits from the
Tohs’ farm every week into the Republic has since dropped from three to one or
two.
Another fruit farmer Alvin Lo has resorted to donating a portion of his
excess supplies as feed for zoo animals, in addition to giving some to
charities and frontline workers.
Malaysia’s vegetable farmers are also grappling with excess supplies
that have few takers.
During the first two weeks of the MCO, farmers had to throw away
hundreds of tonnes of fresh vegetables, said Mr Tan So Tiok, chairman of the
association for Malaysian vegetable farmers. The abrupt implementation of the
lockdown - announced less than 48 hours before it began - led to a
sudden excess in supply.
Mr Tan said that vegetable supplies sent to Singapore every day via the
Causeway have decreased from 600 tonnes to 400 tonnes since the Republic’s
circuit breaker measures kicked in.
But Mr Tan said the situation has now stabilised as Malaysian farmers
have started to grow smaller amounts of vegetables.
The dumping of excess agricultural produce due to a drastic drop in
demand as restaurants, hotels and other food outlets close is happening not
just in Malaysia.
In the United States, the New York Times reported that farmers have had
to dump thousands of gallons of fresh milk into lagoons, or bury one million
pounds of onions or even smash 750,000 unhatched eggs every week.
Farmers in India are throwing truckloads of fresh grapes into compost
heaps or feeding their cattle with strawberries since the only alternative is
to let the fruits spoil, according to Reuters.
The pictures in the media reports showing staggering amounts of
agricultural waste were in stark contrast to images of empty shelves and
snaking queues in supermarkets in various parts of the world, where buying
limits on groceries have also been imposed to prevent hoarding.
This disconnect between supply and demand is the result of the global
food supply chains being disrupted in unprecedented ways due to the COVID-19
pandemic, said experts.
The outbreak has wreaked havoc on the supply chains as governments in
many countries impose lockdowns to curb the spread of the highly infectious
novel coronavirus that causes the COVID-19 disease.
Farmers cannot work the fields and truckers are unable to transport the
food to markets as restrictions are being placed on people’s movements all
over. With airlines grounding most of their fleet, the capacity for suppliers
to export their produce via air freight has also dwindled.
Morehttps://www.channelnewsasia.com/news/singapore/big-read-covid19-global-supply-chain-shock-food-shortages-12655836
April 20, 2020 /
3:00 AM
April 20 (UPI) -- As farmers deal with supply chain disruptions due to
the coronavirus pandemic, drought conditions have gripped California, Florida,
parts of the Southwest and south Texas.
The drought means additional expense for some farmers to find water or
bring their livestock to a water source. It also increases the cost and a lack
of selection at grocery stores for some crops grown in the United States.
But any impact on price is hard to track amid widespread disruptions in
the supply chain during the pandemic, farmers said.
A little over 12 percent of the country was experiencing moderate to
exceptional drought at the end of March, and Florida's condition worsened to
severe drought late last week, according to reports from U.S. Drought Monitor.
Rainfall, soil moisture and satellite imagery of vegetation indicated
fire risk, water shortages and crop loss in the state.
California and Florida are the only areas with significant winter
produce crops, and farmers in both states harvested as drought concerns grew
this spring. Florida produces a broad variety of fruit and vegetables in
winter, while California's production includes groves of almonds and other
nuts.
Drought in the winter in other regions of the country can affect cattle
and production of winter wheat.
Morehttps://www.upi.com/Top_News/US/2020/04/20/Drought-hobbles-farmers-in-California-Texas-Florida/1661586998520/?ls=1
Covid-19 Corner
DJIA: 21,917 +45 Down. NASDAQ: 7,700 +149 Down.
SP500: 2,585 +38 Down.
The NASDAQ and S&P have
joined the DJIA in down. All three monthly slow indexes have collapsed.
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