Call A Cab: The Party Is Over

With everything going on in the world, it seems somewhat surreal that the top news is the first US presidential debate and a possible Disney bid for Twitter.

Frankly, we don’t understood what exactly is wrong over at Twitter. It’s the most reliable, timely news service on the planet (even if some of it turns out to be bogus), and yet somehow, everyone is convinced this company needs a buyout. What they need is a CEO that doesn’t run another company that makes a square plastic card reader that will be out of date by the time Apple or Samsung figures out how to embed that into their hardware. Jack Dorsey is no Steve Jobs. He needs to select a seasoned CEO and let his exceptionally successful business run itself.

Anyway, there’s oil news today too. Here’s the chart:

It’s a veritable sideshow. Here’s the headline summary from Bloomberg:

  • WTI rises as investors weigh prospect of oil-output deal at this wk’s informal OPEC meeting in Algiers.

  • Nov. WTI +$1.39 to $45.88/bbl at 10:17am ET

  • “Saudi Arabia is known for playing to the markets and posturing, by appearing to talk a good game,” Paul Crovo, Philadelphia-based oil, equities analyst at PNC Capital, says by phone

  • “But, when it comes down to it, I don’t believe the chances are very high that we’ll see any kind of meaningful agreement”

  • Venezuela’s Del Pino: We hope to reach oil agreement in Algiers

  • Nov. Brent +$1.44 to $47.33/bbl

  • More active Dec. contract +$1.42 to $47.90

  • Iran proposed output target based on 12.7% OPEC mkt-share: Seda

  • Russia will discuss whether it will meet w/all of OPEC: Novak

  • OPEC announcing cut at Algiers mtg “unlikely”: IHS’s Yergin

  • JPMorgan sees 25% chance of OPEC output deal in Algiers

Yeah, whatever. It doesn’t matter. This is hopeless. It’s as if no one gets it. You have two OPEC members embroiled in an epic, centuries-old blood feud and the market thinks there’s a chance this is going to be solved at a meeting? That’s a joke.

Anyway, we’re getting a pretty sizeable pop in the VIX today…

Which may be a reflection of the debate or of just global uncertainty in general.

The problem we see here - and by “problem” we’re not making a political statement - is that we’ve got a market trading at 18X. That’s almost never been sustainable. On top of that, you’ve got oil prices which are prone to plummet at the first sign of a bad outcome in Algeria. Then you’ve got a Fed that despite their best efforts, can’t hike for fear of creating dollar strength across markets although they’re doing it unwittingly, because as long as the ECB and the BoJ stand ready to ease further, a Fed on hold amounts to a tighteninig. But the noose is … well…. tightening (pardon the pun). The cost of FX hedging exposure to US credit is rising and in the case of Treasurys, has eliminated the yield pickup.

In short: there’s nowhere to go here. It’s over folks. Call a cab and get home safe.

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  • Rodney Emrick

    September 26, 2016

    After the end of QE3 the dollar strengthened and oil tanked.

    So if the fed does raise rates in December and the dollar rises will oil drop again?

    I am trying to plan ahead for what trades that make sense.


  • Al

    September 26, 2016

    I would be at wits end if I was trying to be a long-only LT investor in this environment. There is no possible investing thesis that last over a few days or in the rare case, weeks, with NIRP and currency wars raging across the globe. Meanwhile the US market is taking a small 1/4% rate hike as a harbinger of a series of hikes ramming the roof all the way to 18% rates.

    What's a mother to do?