Monday, August 27, 2018

Market update : The market busts out of 7-month long correction (27 August 2018)

Wall Street extended Friday's push into record territory on Monday, with the S&P 500 registering its second straight record close.  President Donald Trump said the U.S. has reached an agreement with Mexico to enter into a new trade deal, calling it the U.S.-Mexico trade pact.  With a U.S.-Mexico deal in place, Canada will now come to the negotiating table as the three nations look to fully replace their three-way NAFTA deal.
  • S&P 500 today's close: 2896;  Jan 26 close:   2872
  • Nasdaq Composite +16.1% YTD
  • Russell 2000 +12.6% YTD
  • S&P 500 +8.4% YTD
  • Dow Jones Industrial Average +5.4% YTD
$SPY since the 2016 Election (22 months) with Fibonacci retracement.

A table showing the performance of various asset classes since the prior S&P 500 high on 1/26.  We also show YTD and QTD performance.  As you see, US equities have been dramatically outperforming international stocks.

Friday, August 10, 2018

Market update : Turkish Lira Rattles Investors Around the Globe (10 August 2018)

The S&P 500 started the week on a positive note, extending last week's winning streak and coming within 0.5% of its January 26 record high (26-Jan-18 close 2872. However, the index struggled in the back half of the week, especially on Friday amid a sharp drop in the Turkish lira, eventually settling with a weekly loss of 0.3% -- its first weekly loss since late June.
  • The Turkish lira tumbled to a record low against the dollar largely over worries about President Tayyip Erdogan’s influence over the economy, his repeated calls for lower interest rates in the face of high inflation, and a deepening rift with the United States. President Trump doubled tariffs on aluminum and steel imports from Turkey, deepening the currency's losses and raising concerns that the crisis could weigh on other economies. 
  • Turkey is now facing the most serious financial crisis since Mr Erdogan took office 15 years ago.  The decline in the Turkish lira and rising borrowing costs cause a big headache for many Turkish companies, as they have borrowed in foreign currency despite receiving revenues in local currency.
  • In a tumultuous day on the financial markets, the lira tumbled by 14.3% against the dollar to TL6.47 from the previous New York close. At one stage it fell as much as 18.5%. The currency has lost more than 40% of its value so far this year. The lira’s implosion rippled across other emerging market currencies, pulling the likes of the South African rand, the Argentine peso and the Russian rouble lower by between 1.5 and 3.5%.

$SPY since the 2016 Election (21 months) with Fibonacci retracement. 

$SPX - 6 months

President Trump added to the pressure when he made a shock announcement on Twitter. “I have just authorised a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar!” he tweeted. “Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!”

Turkish lira

  • Mr Erdogan urged Turks to stand firm and defend their currency. “If there is anyone who has dollars, euros or gold under the pillow, he should go and convert this at the bank,” Mr Erdogan said.
  • He also held talks by telephone with Russian president Vladimir Putin to discuss economic and commercial ties.

  • Here's how Turkey's currency has fallen against the dollar in the past 10 years – and some reasons for the fall. 

    Other currencies - largest ETFs

    Fri 8/10/18 perf, weekly charts (daily charts, monthly charts)

    Country ETFs - largest drops

    Fri 8/10/18 perf, weekly charts (daily chartsmonthly charts)

    Euro banks
    European banks who have lent to Turkey are feeling the heat. Spanish banks have the biggest total exposure, with more than 30% of total foreign claims on Turkey--about double what it was in early 2013. French banks are next at about 15%, with UK banks accounting for 7% of total foreign claims.

    • The Financial Times reported that the European Central Bank is concerned about eurozone banks' exposure to Turkey because of the tanking lira. The ECB declined to comment.
    • Data from the Bank for International Settlements show eurozone banks have loans worth over $150 billion in Turkey. Spanish, French and Italian banks are the most exposed.
    • Shares in some of Europe's biggest banks were hard hit on Friday. Italy's UniCredit (UNCFF) shed 5.6% and Spanish lender BBVA (BFR) dropped 5.5%. France's BNP Paribas (BNPQF) was off by 4.3% and Deutsche Bank (DB) fell 5.3%.

    The  Evangelical preacher  Andrew Brunson was  released from prison in July 2018.  The Trump administration had thought that it had secured a deal to release the pastor, but Turkey instead put him under house arrest, which angered Washington.

    Recep Tayyip Erdogan, president and former prime minister of Turkey.

    Under Erdogan and his ruling Justice and Development Party (AKP), Turkey has lifted restrictions on public expression of religion, including ending the ban on women wearing Islamic-style headscarves.
    • Born: February 26, 1954;  Istanbul, Turkey
    • 2003-2014 - Serves as prime minister.
    • August 10, 2014 - Erdogan is elected president during the first-ever direct elections.
    • July 15-16, 2016 - During an attempted coup by a faction of the military, at least 161 people are killed and 1,140 wounded. Erdogan addresses the nation via FaceTime and urges people to take to the streets to stand up to the military faction behind the uprising. He blames the coup attempt on cleric and rival Fethullah Gulen, who lives in self-imposed exile in Pennsylvania.
    • June 24, 2018 - Is re-elected president.
    • The Turkish economy has expanded rapidly this year compared with 2017. But its growth in recent years has been fueled by construction financed largely by foreign investors.
    • The European Central Bank expressed concern about the country when President Recep Tayyip Erdogan was re-elected in a snap vote in June and whose growing power has raised questions about the independence of the country’s central bank.

    U.S. - Turkey grievances (military and political)
    • An evangelical preacher, Andrew Brunson,  is one of about 20 Americans, including a NASA scientist and chemistry professor from Pennsylvania, who have been swept up in Mr. Erdogan’s crackdown since the failed coup two years ago. 
    • Mr. Brunson who was applying for Turkish permanent residency, having lived there 23 years, was imprisoned on October 7, 2016, accused of being a member of the G├╝len movement, which the Turkish government considers to be a terrorist organization.  On July 26, 2018, US Vice President Pence called on Turkish President Recep Tayyip Erdogan to release Brunson or face significant sanctions.  President Trump has raised the pressure over the issue because he wants to appeal to Evangelical voters ahead of November midterm elections.
    • Turkey is a major player in the Middle East that’s engaged in war.  American support for Kurds and backing of Kurdish terrorists in Syria, the number one enemy of Turks, has galvanized Turks against the US, now broadly seen as Turkey's enemy. America's gungho pro-Saudi/pro-Israeli pivot & participation in the ongoing genocide in Yemen isn't helping; Turkey sees itself as the moderate leader of the Islamic world and Saudi Arabia as a dangerous rival. 
    • Trump's abandonment of the Iran nuclear deal is another sore point; nearly half of Turkey's oil imports come from Iran, and the re-imposition of sanctions against Iran hurts Turkey's economy.
    • American relations with Turkey were further aggravated by Mr. Erdogan’s embrace of Russia, particularly when Turkey signed a deal in  September 2017 to purchase Russia’s S-400 surface-to-air-missile system. The deal would mean Russian military technicians operating in NATO’s backyard. What especially irked the United States was that Turkey had also been in the midst of purchasing American F-35 joint strike fighters. Congress has since moved to block deliveries unless Turkey cancels the Russia deal. 
    • Mr. Erdogan says the 2016 coup was orchestrated from the United States, and specifically by a Muslim cleric, Fethullah Gulen, from his self-imposed exile in Pennsylvania. Turkish authorities have demanded that he be extradited, something American officials have dismissed, and the detained Americans are widely seen as bargaining chips.

    Sunday, July 29, 2018

    BRICS : 2018 Summit

    The 2018 BRICS summit was the tenth annual BRICS summit, an international relations conference attended by the heads of state or heads of government of the five member states Brazil, Russia, India, China and South Africa
    • The summit was held 25–27 July 2018 in Johannesburg, South Africa, the second time the South Africa has hosted the summit after the 2013 summit.

  • Brazil Brazil    Russia  
  •  India  
  •  China  
  •  South Africa

    China's President Xi Jinping, Indian Prime Minister Narendra Modi, President Cyril Ramaphosa, Brazil's President Michel Temer and Russia's President Vladimir Putin pose for a group picture at the BRICS summit meeting in Sandton on July 26, 2018. 

    Wednesday, July 25, 2018

    The Big Mac Index

    The Big Mac Index is published by The Economist as an informal way of measuring the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries. 
    • The index, created in 1986, takes its name from the Big Mac, a hamburger sold at McDonald's restaurants.

    Saturday, July 14, 2018

    Oil Refiners

    Petroleum refineries convert crude oil into many petroleum products. Most refineries focus on producing transportation fuels -- gasoline, jet and ship fuel, etc.

    On average, U.S. refineries produce, from a 42-gallon barrel of crude oil, about 20 to 19 gallons of motor gasoline, 12 gallons of distillate fuel distillate fuel, most of which is sold as diesel fuel, and 4 gallons of jet fuel.

    There are more than 600 refineries operating globally.  The 3 largest ones: Jamnagar Refinery (Reliance Industries) in India;  Paraguana Refinery Complex (PDVSA) in Venezuela; SK Energy Ulsan Refinery (SK Energy) in South Korea.

    (by market cap)
       Ticker  Company name Mkt Cap
    PXE  -- Refinery-heavy ETF
    • PSX      Phillips 66       57.36B
    • VLO     Valero Energy  49.98B
    • MPC     Marathon Petroleum 36.81B
    • ANDV Andeavor 21.26B  (acquired by Marathon Petroleum (MPC) in 4/18)  
    • HFC  HollyFrontier 11.94B
    • UGP  Ultrapar Participacoes S.A. (Brazil) 9.41B
    • SHI  Sinopec Shanghai Petrochemical (China) 9.11B
    • PSXP  Phillips 66 Partners 6.12B
    • PBF   PBF Energy  4.52B
    • VVV   Valvoline Inc.  4.18B
    • DK    Delek US Holdings  3.99B
    • CVI   CVR Energy   3.46B
    • CVRR  CVR Refining, LP 2.78B
    • SUN   Sunoco LP   2.72B
    • INT   World Fuel Services 1.54B
    • NGL   NGL Energy Partners LP 1.40B
    • PARR  Par Pacific Holdings  798.29M
    • CAPL  CrossAmerica Partners LP   616.25M
    • CLMT  Calumet Specialty Products Partners, L.P.  550.08M
    • REGI  Renewable Energy Group, Inc.  538.04M
    • BPT   BP Prudhoe Bay Royalty Trust  530.72M
    • SRLP  Sprague Resources LP  520.71M
    • FGP   Ferrellgas Partners, L.P.  349.33M
    • AE    Adams Resources & Energy  197.17M
    • PEIX  Pacific Ethanol, Inc.   157.38M


    Charts by ave daily vol // click for live daily chart


    (*)  Andeavor (ANDV), formerly Tesoro, it changed its name in 2017, after it bought Western Refining for $6.4 billion. In 2017, Andeavor generated 45% of its Ebitda, or earnings before interest, taxes, depreciation, and amortization, from refining; 26% from marketing, or selling fuel, Twinkies, and more via 3,250 service stations under banners like Arco, Shell and Mobil; and 29% through majority ownership of Andeavor Logistics (ANDX), a limited partnership with pipelines, terminals, and other assets.

    ExxonMobil oil refinery in Baton Rouge, Louisiana (the fourth-largest in the United States) 

    ©Artremis / last update JKM 12-May-18