Stocks (SPY)(IVV) tend to remain undervalued or overvalued for a long time during crises and bubbles, respectively. The tech (QQQ)(XLK) bubble was a prime example of the latter.
For most tech companies, and tech investors, the world is a slower, less dynamic place than it was before the tech bubble burst in 2000. It’s also a less significant place.
In the week of November 14, US propane inventories increased by ~99 thousand barrels to ~81.15 million barrels.
The EIA projects a 4.8% year-over-year increase in total marketed natural gas production to around 73.79 bcf/d in 2014.
Natural gas prices started the week on a strong note following cold weather forecasts in the days to come.
The US added 2,789 bcf of natural gas to storage in the 2014 injection season. This is significantly higher than the 2,131 bcf injection last year.
Natural gas consumption in the US is very seasonal. Consumption is highest in the winter when heating demands are at their highest.
Weakness in crude prices does not bode well for profits of major oil producing companies like ConocoPhillips, Occidental Petroleum, and EOG Resources.
Crude stocks at Cushing increased by 718,000 barrels to ~23.25 MMbbls (million barrels) in the week ended November 14.
Distillate stocks decreased by 2.1 MMbbls (million barrels) last week versus analysts’ expectation for inventories to decrease between 1.4 and 2 MMbbls.
Last week, gasoline inventories increased by 1 MMbbls (million barrels) to 204.6 MMbbls.
US crude oil refinery inputs averaged 15.9 million bpd during the week ending November 14, 161,000 bpd higher than the previous week’s average.
Analysts were expecting a crude inventory draw of ~1 million barrels, but inventories instead increased by 2.6 MMbbls.
Crude oil inventory levels change based on demand and supply trends. Demand is primarily from refineries that process this crude into refined products.
One measure for this is the VIX or CBOE Volatility Index (otherwise known as the fear gauge). The index tracks the implied volatility in S&P 500 options.
Many people are worried about Europe slowdown, so eurozone stock prices already reflect a fair amount of risk. But prices in the region still could be cheaper.
Oil is currently trading a little low given the current supply situation and inventory levels. Prices aren’t high enough to discount potential large events related to a Middle East crisis.
While US valuations currently look reasonable, they’re predicated on a U.S. economy growing at around 2% to 2.5%. The risk of slower growth is not priced into the market.
“What worries you the most?” “What keeps you up at night?” I get these questions a lot from investors looking for insight into what might cause the next market correction.
I continue to see relative value in select areas of the fixed income market such as tax-exempt bonds, commercial mortgaged-backed securities (or CMBS) and U.S. high yield.