Ouch!
Boks win against Samoa, just
Rand back to just above 8.00 to the US Dollar
Markets are shorting again after they were “squeezed” during the week.
It’s the end of the 3rd quarter so there is a lot of financial jostling going on (performance bonus time for the asset managers!) – don’t read too much into any short-term trends!
Let’s enjoy Scotland – England tomorrow, should be a cracker!
Have a great weekend!
Here is an interesting “thing” that you may enjoy?
In financial terms, a “Short” is when you sell something you don’t have and buy it back again later, effectively making money in the process. This however, only works if the price goes down! If the price goes up after you bought the “short”, you’re in the “pooh” and all the poorer for it!
So, in the EU at the moment there is all this “doom and gloom” about the probable Greek default, and the knock-on effect it will have on those other EU countries that loaned to the Greek government! Hence, the price of the Euro currency has been weakening lately, which has in turn strengthened the Dollar, and as a by-product allowed all those who had extra non-Dollar and non-Euro currencies (e.g. SA rands) to buy more US Dollars, hence the weakening of the Rand! As this weak Euro trend established itself many have now further ”shorted” the Euro knowing pretty well that it is going to weaken further! Beware!
At the moment the Euro shorts is at an all time high of 16.4 billion!
So, what does the “proper/real” market need to do? It needs to “squeeze” those “shorts” by strengthening the Euro before it can go lower again!
This is what happened yesterday to the Euro, and with that to the rand as well! The rand is back at 8.04 having been at 8.40 three days ago!
Bottom line; “If you want to ‘Short’ the market, beware the ‘Shorts Squeeze!’, it might get you “pooh in the shorts”
Effect on fuel price – “swings and roundabouts!”
..and now we are back with the US Dollar!
“Risk sensitive” money is now leaving in droves and returning to the US Dollar safe haven! What an amazing turn around! The main driver is the weak Euro issue caused by their debt issue, but not only that, it is the lack of co-ordination amongst the Euro financiers that is the real worry!
The effect on non-US Dollar countries, i.e. the rest of the world, is that their respective currencies have weakened relative to the dollar, which is not unusual! However, the real effect this time is the steep rate of weakening, which is causing the pain! This rapid currency weakening will have a significant inflationary effect on those non-dollar priced items, including SA priced Fuels! Be warned!
In summary, it is true to say that we are not going into a recession, or, to be more accurate, “it is improbable that we are going into a recession”. It is however more probable that we will endure a significant period of slow global growth! The failure risk in such a scenario is that it is easy to topple such a ”slow growth cart” and head back down into recession, with the main ”anti-cart flipper” being, global coordinated financial management! This will take time, effort, patience and trust! Let’s see what happens, and don’t forget the Chinese, they have an important role to play.
In the meantime, it’s “koek day” in the office today our team won yesterday, spring is in the air, and the whales are jumping outside in our ocean…go you good thing!
Morning All
Oil has dropped overnight to $ 86.64 (New York’s Light Sweet Crude – that’s the graph I normally show), and $ 111.14 (Brent North Sea, which is what’s normally quoted in the SA press).
this drop is due to the EU Finance Ministers delaying a decision regarding the Greek bailout plan till october. It shows indecision amongst the ranks to solve the debt crisis which is confidence destructive! Also, US President Obama is due to speak later today and re-affirm his cost cutting measures which will dampen US growth. A weak US growth rate with uncertain EU reduces the Chinese export quantities/forecasts, hence their need for fuel, hence the “perceived” oversupply of current supplies, hence the drop in price,…simple?
Enjoy the week. Well played to the Springboks and Irish!
A term used by pilots who guide ships into port! , i.e. don’t change anything unless something drastic happens!
This was the thought that came to mind this morning when surveying fuel related news items!
Sarkozy and Merkel support the Greeks and that is good news, i.e. good for the probable “slow growth” and bad for probable “recession” theorists! Rand is weak at 7:43 but that is due to stronger Dollar which is due to weaker Euro, which we know about!
As you also know, I listen to the Chinese as they tend to make a lot of sense on global economic views and trends! An interesting series of article are being published concerning a possible “property bubble”, which if it burst due to overextension, may go the same way the US property burst in 2008/2009, with the same effects, very significant! I’ll watch how this goes, either way, it still appears there is some “extension” left, so it’s, “steady as she goes”, for the time being!
Oct, Fuel futures, also, “steady”!! Ok, .. I’ll stop now.
The Chinese are willing to assist the EU by buying the debt of peripheral EU sovereigns! This is good in that it provides stability and prevents the slide into recession. Would you buy EU debt now? So here’s why the Chinese would?
Makes sense doesn’t it? I tell you what, these Chinese make a lot of sense to me!
Euro is getting hammered at the moment! Late last week Friday the ECB senior economist Jurgen Starck resigned unexpectedly which was seen a “yet further uncertainty” in EU land. To add to that the Greek debt situation appears to be getting worse and there is now talk of Greece actually defaulting and leaving the Euro. If so, it will take a few important banks with it, maybe not completely sink them but at least take them down to their knees or give them a “good kick in the stomach”!
Money leaving Euro is going into gold and US dollars, hence weakening the rand which in turn will make the SA Fuel petrol higher, in rand terms! Expect a rand range of 7.20 to 7.38 to the dollar today and maybe tomorrow!
This Euro flight should not dramatically effect the global fuel pricing, unless the US markets also start a sell-off, which is unlikely besides doing a sympathetic “dip”.
China still quiet, understandably so, as the dollar has strengthened! They have their own currency problems (is doesn’t free float and is under increasing market pressure to do so!), although these factors should not greatly affect the fuel price.
I did see a late news item on Friday saying that the US inventories were down lower than expected, but I do not believe it has any strategic value to change the relatively stable trading range at present!
I expect a stable fuel price week!
Other than that, a great sporting weekend, nail-biting WCR on a Sunday, a classic US Open tennis semi-final (Federer vs Djokovic 5 setter), good English Premiere “football”, fair local soccer, cricket OK, and Dutch golf, not too bad! Sharks came from behind (luckily), Stormers and Lions did the usual, Bulls got lucky, and Cheetahs tried hard, very hard,..again! – I feel for them!
