Tricky tricky. Not an easy market at present. Trump and China appear to have called a truce which again is headline news with absolutely zero substance. It’s ‘can kicked down the road’ stuff again. Brexit much of the same although yesterday’s debacle in Parliament looked like a dress rehearsal for next weeks vote. Was that the intention all along? Mr EU… did you take note of that? Did you take it as a warning or a poker style bluff by good old blighty? Worse case scenario… push it all into 2019 and extend Article 50? Please please do not agree to this. I think the UK has had enough of MP’s and politicans in general. Brexit has revealed the very darkest parts of UK politics. From outright lies or false promises to BoE governors predicting huge house price crashes… as well as the previous chancellor. The UK public have been subjected to more dodgy headlines and promises than your average online Black Friday retailer. Was this the idea from the beginning? Exhaust all involved and reduce the most important decision in UK history to a ‘this is the only deal on the table’ situation. 2 years+ and progress is zero. How much tax payer money has been spent on flights, meetings and planning for this poor deal being tabled? Extend Article 50 and you are opening the door to future extensions…. until of course there is another referendum which will be justified based on the contrived mexican stand off which seems to be in the making. The trouble is… a second referendum may well deliver the same result. In fact, after the way the EU has acted, my assumption is it would indeed be more popular to vote the UK away from these EU stalwarts. Brexit is Brexit. Get it done with no deal. Force the UK and EU to then work together, because the idea of them working apart is nigh impossible. Sometimes you have to throw the dog into the water… it will soon learn to swim.
Big day tomorrow. OPEC members hook up for the annual biscuit fest. Plenty of tea and munching going on. This time around there is a feeling of global pressure on Saudi’s. US are squeezing from all sides. Saudi’s need military supplies to deal with Yemen. Saudi’s need Iranian’s sanctioned. Saudi’s need many things which the US can help with. So what do the Saudi’s have that the US wants? Well, in a nut shell my guess is that this is all leading to a US listing for Saudi Aramco. Worth billions and billions to the likes of Goldman’s, JPM and others likely to be the book runners. Saudi’s had flattered many with LSE actually bending over backwards and changing some laws and decades of compliance to allow Aramco to bypass Jail and go straight to GO. There are no gluts out there this time around. There are no major oil tankers floating off the coasts of US or China. Yes there is an oversupply but that is simply because OPEC pumped harder upon request from Mr Trump some 3 months ago and then Mr Trump pulled the rug on delivering meaningful Iranian oil sanctions. Had Mr Trump followed through with his promises, PoO would look just fine in the mid $70’s. So bear in mind, if OPEC cut tomorrow, they also cut Mr Trumps ability to up the sanctions on Iran. Mr Trump wants OPEC to stay as they are so he can then hit Iranian oil with the proper level of sanctions without sending PoO into the $90’s. It all comes down to trust. Which is probably why OPEC might elect to go for moderate cuts citing March as next key review/meeting date. Then it’s over to Mr Trump to deliver further Iranian sanctions. If he fails to deliver, then I would expect OPEC to cut again by Q2. OPEC is fast becoming controlled by the US and that will worry many members as well as the lieks of non OPEC Russia. One OPEC member has already elected to jump ship although to be blunt, they are full of GAS.
What does this mean for PoO sensitive equities? Well, the next month could be a decent recovery month if cuts are reasonable and hedge funds begin closing out huge shorts on PoO and there are record numbers out there that need to be bought back. If cuts are on the low side, then it could be sideways trading for the next 3 months. Dull dull dull. But remember one thing… PoO has already fallen from $86pb on Brent to $60pb recently. That’s a huge correction and some might say the worst is already priced in. Some might say too much negativity is priced in. The Algo’s will walk it back up when they are ready.
Week 48 Review.
PoO’s wobbles finally put an end to TheShareHub’s growth in 2018. That’s a drop of 15% or more over the last few months. The newspaper picks look like they are suffering from Brexititus. A Santa Rally looks impossible now especially with Brexit looking like a roll over into 2019. Commodities might get a mince pie or two from OPEC tomorrow but that looks like it for 2018. It would be a victory to finish 2018 with a minor bloody nose but any growth would be a glorious result against 2018’s backdrop. TheShareHub picks still have hope, but the newspaper expert picks looked well and truly done with little hope of recovery.