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Showing posts from November, 2015

Paper on Monetary Policy During Financial Crisis on Second Tab!

Hey guys, over Thanksgiving break, I wrote a little paper on some of the ways Ben Bernanke communicated with the market in order to try and fight the financial crisis. He called it "open mouth operations" a very catchy name that is referenced in my paper. If you would like to read it, go to the second tab on the website! Also, commenting is available for anyone who wishes to share their opinion.

Enjoy,
Jacob

Thanksgiving Markets

Trading resumes on the last full week of November with one of the biggest retail days in sight. After Thanksgiving feasts in the United States, consumer, both online and off, will spend copious amounts of money trying to capitalize on their favorite stores' sales. Like a proverbial"run of the bulls" at Pamplona, hordes of people will wake up early just to partake in the opening of the most robust season of spending in the world, the road to Christmas. Just like those charging bulls in Pamplona, investors will tend to trade in an uptrend as many sectors feel a boost of demand. While prospects for consumption are sure to increase going into December, trading sentiment is currently dragged down by bearish energy shares. Therefore, we should see a lot of flat movement as buying and selling in the overall market will be about equal. individual industries might experience different trends, but broad-based gains and losses should cancel any clear trend through the rest of Novem…

How Low Can Oil Go?

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Today, investors trade off of gains in Wednesday from the release of the FOMC meeting minutes that supported rate hikes in December. As a result, the S&P 500 gained 1.35% at the signal of stronger economic growth as well as the conveying the belief that rate hikes are the right move. Some of the more hawkish Fed members already voiced regrets of not raising rates earlier and the tide seems to be turning in their favor. In my opinion, the major delay of rate hikes this year has splotched Janet Yellen's credibility as a central banker who can rule on the middle ground. Her decisions demonstrate her dovish tendencies in FOMC meetings which may have appeared desirable coming out of the financial crisis with a sizable unemployment but not during stabilization periods of the business cycle. While most lost faith in the free market system during 2008, it remains the single most effective pricing mechanism for the value of goods and the value of capital. The Fed cannot facilitate limi…

Oil Shares Lead a Market Supporting Solidarity

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The biggest story of the weekend, which has already begun to pour into the following week, was the terrorist attacks in Paris along with the manhunts and retaliations that followed. Most people understand the political ramifications of the ISIS attacks but aren't often as privy to the consequences in the markets. This is exactly the premise of successful terrorism, that the target experiences detrimental changes in political, social, and economic structures which either hinders growth or disrupts the ability to strike back. In this case, ISIS sought to limit the political will to conduct an air campaign in Iraq and Syria. The results? Well, let's say they came out in favor of solidarity.

The S&P 500 of the United States actually grew 1.51% over the past two days with Monday's movement more intense than today's flat movement. Small cap stocks remained solid as well despite bearish movement last week and the attacks in Paris. Gains of 0.73% were sustained even though…

Islamic State's Oil: An Attempt at Legitimacy

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Just three days after horrific attacks in Paris that leave over 120 dead on a Friday night, military responses intensify as France and coalition-lead forces have revenge on their minds. Consequently, dozens of air raids over some of the Islamic State strongholds occurred early today.Among the targets, spread over lands in Syria and Iraq, French bombers leveled the unofficial capital of the terrorist organization in Raqqa. While many military bases and industrial structures were successfully hit, a news website associated with ISIS reported that there were no casualties from the attacks although that is most likely not the case. These attacks introduced the conflict to more aggressive plans from Western forces that include President Obama's "amplification: of air campaigns as well as special operations that will be employed strategically in order to continue towards the objective of containing the Islamic State and the organization's desire to increase the amount of terror…

Volatility and Trading Ranges: Energy and Commodities

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Once again, the busy trading week ends with decisive movement to take into the doldrums of Saturday and Sunday. Investors are left with a particularly bad taste in their mouth after stocks turn bearish on them. Across the globe, we are seeing a systematic loss hit securities that may or may not have been at speculated highs. Let's look at a chart.


Here, we have three of the major national indexes plotted over the past three months, from the correction in August to trading now. Most of the trading that is represented by the graphs is in October, the month with the largest bullish gains so far this year. As can be seen, equity growth during that month surged up to pre-correction heights (except for the Shanghai Composite Index). The S&P 500 reached a new high. in fact, just 0.87% higher than pre-correction levels, and the Euro STOXX 50 capped at just under that point. Even though the Chinese stock market only gained to about 90% of their previous price, they saw the highest gain…

Thinking of Paris

Tonight, just across the Atlantic Ocean, the night of Friday the 13th has been painted with terror. In five different spots around Paris, either gunman or explosions sought to kill and destroy the everyday life that only terrorists would desire to end. Crowds of spectators at an international soccer exhibition were evacuated to safety after two explosions alerted the local authorities to converge upon the street in search of the attackers. Just miles away gunman walking down Parisian streets, entering various popular Friday night locations, and killing dozens of civilians were neutralized after the massacre ensued. Immediately after, emergency relief personnel flooded the scenes with firefighters, policemen, and eventually French military units assisting survivors, both injured and uninjured. The death count is estimated to be between 80-100 with higher estimates at 120. French President François Hollande declared an official state of emergency as well as closed borders as his governm…

Welcome New Political Commentary!

Hello and welcome to a great and glorious expansion to the Black Gold Disease family. While I never thought I'd get into the M&A business (I am just a blog after all), there will be the addition of another stream of analytic writing connected to this website. As I focus on finance and energy articles, this other blog will provide political commentary for those who wish to read comments about current political events. I will continue to author posts on this page, and nothing will change here, but just above the moving ticker, a tab will be created to create a link to the new political blog. Currently, it is named "Politics" (not a very clever name), but it will be adjusted as the author begins to settle in. The new resident analyst will be John Learn, a good friend of mine that wants to pursue a career in political science and a fellow writer who loves to speak his mind. I hope that you will click on the new tab as his stream begins to take shape. From time to time, w…

Rejecting Keystone: The Importance of Incentives in Environmental Policy

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Today, we're going to dive into the ugly world of U.S. petroleum imports, a long debated topic often stuck in the political rifts that continues to plague this country's reputation. Particularly recently, the passing of Keystone XL Pipeline bill onto Obama's desk has reignited the conversation over domestic oil product, the environmental effects of fossil fuel consumption, and energy independence in the United States. In the end, there hasn't really been an astute analysis of the subject with regards to all three topics, instead, the proposed pipeline is often dismissed as an old platitude of the rifts between climate change and energy policy, and no one seems to find a middle ground. Just a little while after the bill was passed to President Obama, his veto power killed the hope of it passing with little political and economic repercussion evident. What really did the Keystone Pipeline Project mean for the United States? The proposal had such a long appearance in Cong…

Oil's Reaction to Fed Rate Hikes

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Let's talk about oil, and let's talk about rate hikes. Let's talk about how afraid energy investors are of the stricter monetary policy that has come to destroy their beloved (and lucrative) oil and gas stock that can't operate effectively with such low commodity prices. Many oil companies who are struggling to continue cutting costs are experiencing a cash drought that doesn't show any hints of amelioration. Price-to-earning valuations are continually getting more expensive, but not because of an ineffective cost structure but waning revenue and cash flow. The only way to be evaluated as an inexpensive stock, for the near future, is cutting costs, and we have seen that firms are doing that with OPEC and the EIA projecting significant investment cost cuts by the next year. Some oil majors like BP and Shell have abandoned discovery projects in the arctic region and some Asian states, something that is not advantageous as the global economy tries to escape a slowdown…

A Case for Raising Rates: Unemployment and Inflation in 2015

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On Friday, the trading day was dominated by the revelation of a key economic indicator which primarily drove the movement of equities at the end of the week. Many might be confused as to why mediocre gains populated securities during Friday's session with the S&P 500 losing just 0.03% and the Dow gaining a small 0.38%, but the monetary implications of the data speak for themselves. Before the session even started, reports of nonfarm payrolls came out and stunned investors and economists who had relatively lower expectations. With a consensus estimate of 180,000 jobs created in October, the bullish month destroyed another lagging estimate with 271,000 jobs created in those 30 days, the most in all of 2015. On top of that, hourly earnings grew 0.4% after a September of no growth and a consensus of just 0.2%. Both of these economic indicators were beaten be almost double the estimate that was given based on the current scope of the economy and the track record of the previous mon…

Markets Pared Before Jobs Report

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Metaphors, in my opinion, can add a lot to the ideas surrounding the stock market and its movements. Often times, they can paint pictures more insightful than those of simple numbers, but at the same time, their themes may be over or understated. For that reason, history sees a lot of finance commentators burned on their choice of words. None was put under more scrutiny than Ben Bernanke as the Fed chairman during the financial crisis of 2008 where debates over one word were not uncommon. So I will attempt to take on the same responsibility as I use the images that I think of to describe my ideas about current market conditions. Over the past three trading sessions, we've seen pared losses looking to cap out market gains. No major losses plague any security except for extenuating circumstances. I liken it to a glass of water that's been filled to the brim. When it reaches its inevitable point of full capacity, the drinker ofter takes a small sip to quell that chances of overfl…

Speculation and Energy Devaluation

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The month of November opens with the continuation of earnings season and the introduction of a slew of economic statistics to the respective economic environment. Projections of the markets and where they go from here have now assigned a higher probability to a rate raise, the ominous possibility looms larger as strength becomes more evident. I find the process almost paradoxical. Acting a lot like a contrarian indicator, Fed policy change signals send contradicting signals; for example, markets responded with positive movement when the Fed cited a rate delay despite broad-based economic weakness, Traders have a weird way in deciding what is important and what is not, but sometimes they can be wrong, hences, corrections and bubbles exist. According to MarketWatch, suspicions of another tech bubble (first one in 2001-2002) are looming over data that shows tech spending is moving slower than tech equity cash inflow. Nasdaq growth might prove to be a bit overvalued, especially after impr…