We’ve already heard a ton about the Doha OPEC meeting and what it could mean for crude prices. A good source i’ve been using for Energy-related research is John Kemp out of Reuters. (firstname.lastname@example.org), and @JKempEnergy on Twitter. (Thanks to Bob Brinker for tip to follow John Kemp.)
The expectation for Doha is that there really wont be an agreement to cut production or maybe even freeze production so expectations for anything bullish around crude prices appear low. John Kemp did write this past week that he thought that the Brent crude market was coming back into balance. (Search Twitter for the article.)
Schlumberger (SLB) is the first of the energy sector majors to report, and it will be next week, Thursday after the bell. (Long IYE, XLE, small position in XOM)
From what I gather, Brazil’s lower House is to vote on Rousseff’s impeachment on Sunday, although her VP is also under scrutiny now too. EWZ has been one of our best trades year-to-date, with Brazil representing the poster-child of everything that has gotten hammered in the market the last 3 – 5 years: Energy, copper, grains, the strong dollar, weak real, etc. etc. not to mention what appears to be a corrupt, socialist, government.
Even if Rousseff stays she likely is permanently weakened, and the EWZ will continue to work (in my opinion) if the dollar stays weaker versus the real and commodity prices remain firm. (Long EWZ)
A small position was taken for clients this week in the YCS, which will benefit if the yen returns to weakening. The yen has had an incredible rally from 125 – 126 down to $170 this week, and has backed off a little to the 109 area this week. The YCS hasnt been this oversold since 2012 per one of my favorite technicians @GarySMorrow. Morrow also posted to Twitter, today’s Wall Street Journal editorial that appeared on the failure of Japan’s negative interest rate policy and what the policy has done to savings in Japan. Personally i think the odds are low that this ever happens in the US, but take that as one uninformed opinion.
The point of all this is that Abe and Kuroda may have to burn the yen again, just to rectify the current monetary policy blunder. Remember, as we learned here in the US, a stronger dollar is a de facto tightening in monetary policy, so we can assume that the yen strengthening is a de facto tightening there as well. Note the stocks of Japan’s major exporters, like Toyota, Honda, etc. However, expect jaw-boning first by Kuroda to see if he cant weaken the yen that way. (Long YCS)
Summary: I will be traveling Saturday, April 16, 2016, so the Weekly Earnings Update won’t appear until Sunday morning. (Client positions can change at any time.)