I've heard talk of a short gold, long oil trade that is in play.
That will be hurting today and will be interesting for other markets if that position is shaken out.
i.e. selling long position in oil and buying back short in gold.
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I've heard talk of a short gold, long oil trade that is in play.
That will be hurting today and will be interesting for other markets if that position is shaken out.
i.e. selling long position in oil and buying back short in gold.
Short term maybe. I shorted gold over night and did very well percentage wise. Closed out when it approached the 1200 support level. Keeping an eye on it if it breaks down. Will depend on sentiment and/or news to break or bounce I assume.
It will be interesting if todays action reflects that--Dow was down ,but not spectacularly (just really erased the gains the day before )still up on the last 3 days or so--It may need more of a substantial drop to have an affect--(although I think the fact that it had a multiday run made some feel the bottom had been formed)and maybe it did --who knows at this stage
As usual things are not quite that simple TJ--The fear about the banking sector ,aside from derivatives,(especially Duetchbank ) is that alot of them have a big stake in financing the energy sector(which is having a bad run at this point)--Of course not all are overexposed ,but with banking it only takes a few....Energy may stabilize and banks come out smelling like roses...or not.
With banks,its usually a case of the odds are in your favor ,but if 1 or 2 fall then things get serious,so it pays to be prudent.
Its not guaranteed,but there is usually some warning rumblings that at least give the informed investors a bit of time to at least try to get their capital somewhere a bit safer(Kiwi bonds-gold ,etc) to avoid a possible ''haircut''
Its obviously a worse case scenario and hopefully will not happen----But as you know ,none of us are right all the time,and adopting a dismissive approach could be a hard lesson.
PS-Its interesting they use HSBC as an example --one of the more corrupt merchant banks(they have certainly been known to hide things and fiddle with results)
http://www.theguardian.com/business/...ndering-claims
TJ..As I see it.................A tipping point scenario...All it takes is a seemingly insignificant event to cause a failure within a very big industry that has massive financial wobbles..the resulting failure being huge enough to flow on to set off a global banking crisis ..
In history the main culprits have been property crashes or Bank systemic deviations..or maybe any other individualistic anomaly that had gravitated huge amounts of National funds towards its market..such as the ridiculous tulip investment mania ..
However. I've observed from past history that the recognising of the culprit doesn't always result in the imminent collapse as Michael Burry found out when He realised that many subprime home loans were in danger of defaulting.{Film - The Big Short}..It requires a catalyst which may happen now or take months or years to happen... or may not happen at all as time may correct/lessen the culprit problem....
One common catalyst is crowd panic which creates a bank run....then as Warren Buffett would say "Only when the tide goes out that you learn who's been swimming naked"
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TJ ....At the moment the markets sees the culprit..The Petroleum Industry, the biggest industry in the world, which was once loosely valued including oil reserves at $US~173 Trillion (@$US100/Barrel) shrinking to $US~30 Trillion....
The market is obviously worried that a catalyst may emerge while Oil is still at its $US~30/barrel level and result in a realisation of that evaporated $US 70 trillion...That realisation event could be Globally destructive enough to send the world into another severe global recession .. .....The catalyst could be anything, it could be a very large event or it could be a trival seemingly insignificant event...(the extreme example in the Film The Butterfly Effect it was as small as air disturbance from Butterfly wings)
So its a natural behavioural thing at the moment for the world markets to flinch at any negative global event happening no matter how big or small in fear of that one unknown event being the catalyst...
Its also the reason why the normally uncorrelated Oil/sharemarket relationship is now correlating..
The oil industry won't fail.
Unlike tulips, the world relies on oil. Not just for transport, but most plastics and industrial chemicals as well. It's everywhere
Supply has been constrained by OPEC for many years, massively distorting the real value of oil
Shale fracturing has removed the supply constraint, and for the first time in a generation (or two) the market is behaving normally
Low prices will systematically remove higher-cost producers, and demand will increase as lower prices continue to flow through the economy or the world
The economics of oil consuming businesses will be improved if they don't pass-through all the benefit (refer NZR result today as an example)
Low oil prices are very good for the world economy overall, as there is more discretionary spending money available for other more productive uses
A few oil companies will fail, but business failure is part of the natural evolution of economies as technology and/or circumstances change (eg Kodak)
But low oil prices aren't so good for some companies that can only make money at a higher price.
If they fail, and they have borrowed big $ then the lender could be in trouble - the banks!
It isn't about the failure of the oil industry per se.
A few countries will have problems also - not a happy time for their residents. A bit of unrest maybe?
Of Course Not...The oil industry will not obliterate but all things fail with time, they correct (evolve) to gain more life expectancy (chaos theory) ....systemically....the oil industry could fail at any time and that failure would cause a beginning of an industry structure correction, Financial Default (bank crisis) and a very unpleasant global market correction...
As you said natural evolution, but at a higher level (sector) not at a sub-level (individual businesses)..These processess can be slow motion plays eg Property Market Failure 2007 USA, Spain, Ireland, Greece..which (accept Greece, maybe Spain?) has lasted for up to 8 years before the system finished correcting (evolving).
Low oil prices are very good for the world economy overall, as there is more discretionary spending money available for other more productive uses...The market doesn't agree with you on this one