Wednesday 20 April 2016

Sending oil down and politics up.

Oil. It’s a speculative market we know and the price can whip around without much more than a wiff of news at times, and at times can whip around contrary to what news would have you expect it to do. Sunday night’s post-Doha drop, reverse and clean break higher were, after the event, blamed on Kuwait oil workers strike, a weak dollar and many other things, where many other things = anything that can be levered in to fit with the price move.

But the fact is that a lot of speculative positions have been switched. As JPMorgan said
"Ahead of last weekend’s Doha oil producers meeting, data from ICE and the CFTC show that money managers added more than 47,500 contracts and 20,800 contracts of net F&O length in ICE Brent crude oil and NYMEX WTI crude oil, respectively, for the week ending April 12. In Brent, money managers added nearly 30,000 additional longs while cutting their short position by more than 17,700 contracts as well. This brought managed money net length to more than 402,800 contracts as of last Tuesday, the longest level on record by more than 39,000 contracts".

Record net longs at this point in the cycle? Ok, I can understand that oil may go up in the long run but futures positions rarely hang on the way through a move without the odd washout. Record longs normally mark tops. Now I'm not saying that this record long won’t be beaten by the record long getting even record longer but as it is and post the Doha 'no agreement' and after exceedingly big spikes since Monday morning, I am looking for oil to move lower again. And coming from this oil bull that’s tough to say.

But it also fits with a view on the USD. Things have gone far enough. The pendulum of Fed expectation is at its zenith on the dove side and I am convinced that any subplot from the authorities towards the USD is stabilisation rather than outright weakness.  Reiterating a view from before, GBP is worthy of a sell into the Brexit vote. Selling GBP/USD encapsulates both views.

Selling Sterling and oil is a trade of my distant past. It’s the old Saudi money trade. Next I’ll be selling Gold as well as they all tended to move together.

Anyway enough of markets, let’s have some fun. Time for some political questions as we know algorithmic trading models don't do politics and so won't be able to beat us to the answers

If you were a Greek politician would you -

- Be wondering how you were going to get through the summer.
- Out on your company 3 engined 900hp speedboat offering lifts from Turkey to anyone who could pay as you would get paid by the EU to take them back again.
- Leaning on the EU to provide more or you would kick up trouble just before the UK votes on Brexit
- Ask all your diaspora in North London to vote for Brexit hoping that it would shake the EU up enough to be nice to you.
- Have a proper job by now.

If you were a UK politician would you -

- Send yourself on a fact finding mission to a Caribbean tax haven for 6 months until things settle down.
- Not treat all voters as children because by definition anyone allowed to vote is over 18
- Treat all voters as children as they obviously all are (as beautifully expressed in the Daily Mash)
- Find yourself suffering from the same matrix reporting nightmares that most investment bank staff now find themselves in, as you battle to satisfy party bosses, Brexit beliefs and constituents, though they all may be different.

If you were a French politician would you be

- Fighting as hard as possible to be Macron’s best friend, especially as he sounds like an Avengers character.
- On time to a meeting to disprove the theory that you never are.
- On your lunch break and 3rd bottle of wine.
- On Holiday
- On Expenses
- All of the above at the same time.

If you were a US politician would you

- Be wondering how to be more right wing and outrageous than Trump without sounding like a scene from Monty Python’s 'Life of Brian'.
- Be wondering how to be more old than Clinton or Sanders.
- Be wondering how the heck anyone who is moderate in anything stands a chance.
- Be wondering if you would be better off in the Roman Senate than the US one as it was probably less politically nerve-wracking.

If you were a Russian politician would you

- Say “Yes sir Mr Putin. Ho ho that is also a very funny joke my comrade leadershipness”.
- Not do anything else if you fancy your chances of outliving a mayfly.

If you were a Brazilian politician would you be

- Reading up on Che Guevara and Castro’s methods of seizing power from a corrupt regime.
- In what’s left of the rainforest measuring up some new grazing fields for the family estate.
- Selling oil at these levels as a hedge against all that Petrobras stock the company you don’t own in Panama has.
- On the way to Japan offering a country merger.

If you were an Icelandic politician would you

- Be on your way.
- Be on your way to Panama.
- Be on your weight watchers program.
- Bjorn Again. Well an ex-PM might make a living as an Abba tribute band member if he grew a beard and his hair and wore silver bell-bottoms. Let’s be honest, he can’t be any more embarrassed.

If you were a Euro-politican would you

- Give up your pension rights as they are much more generous than those of most of the people you represent, though you wouldn’t know that as you haven’t met any of them.
- Give a talk hinting at future policy for €10,000 to a hedge fund gathering without telling anyone.
- Give peace a chance.
- Give a damn what anyone else thought if they weren’t French or German.

If you were an Australian politician would you be

- Looking forward to an imminent election as an opportunity to reaffirm Malcolm Turnbull as the best leader you have had for years.
- Looking forward to petty infighting of such a local nature, to the outside world you appear like a 1980’s teenager, complete with old suit and too-short tie.
- Looking forward to blaming someone else.
- Looking forward to another election in a year's time anyway as that's pretty much the historic frequency of them .

If you were a Turkish politician would you

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