Equities and the Economy:

Global equities were a sea of green yesterday with investors shaking off any jitters post the BoJ and, more importantly, FOMC meetings clicking the “buy” button. The Dow was up as much as 156 points and although it pulled back in the afternoon it still posted a good day ending up 99 points, 0.54%, the S&P 500 rose 14, 0.65%, to 2,177 and the Nasdaq climbed 44, 0.84%, ending at 5,339. The S&P tallied its best two day performance in more than 2 months and the Nasdaq closed at a record high. Folks its “lower for longer” and “risk on.” By the way, you might want do a little research on the Zimbabwe stock market. You’ll see what happens to a market on steroids given by a central bank. Now I’m not saying we’re going Zimbabwe’s way but current global central banks actions do nag at me. Let’s ride this pony as long as we can, but have that trailing stop in.

Turning to the economic data, the Labor Department released it weekly initial jobless claims report yesterday noting claims fell by 8,000 last week to 252,000, a two month low. The labor market remains solid. The National Association of Realtors reported homes sales fell 0.9% in August which is disappointing but the theme has been and remains, there’s a lack of inventory which is driving prices higher making affordability an issue. The Millennials are all complaining. The Conference Board reported that its index of leading economic indicators fell 0.2% in August which was both below forecasts and disappointing. The Board’s economist, Fr. Ataman Ozyildirim [whose name in Orc language means “He who forecasts admirably and well”] stated that although the index declined in August growth is moderate and the trend remains upward.

This morning I’m seeing profit taking across the globe. Asian stocks closed down and the European markets are trading down about 0.4% and we’re seeing the “momentum trade” push U.S. stocks lower but really only marginally with the Dow down 52 points.

Oil

Oil closed higher for the 4th consecutive day with WTI posting a 98¢ gain closing at $46.32 and Brent adding 82¢ settling at $47.65. That being said, we really are just range trading. We’ve been between $39 and $52 since last April and $39 and $49 since early August. On Monday OPEC’s meeting in Algiers begins. Expect to hear hawkish talk, especially from Iraq, Venezuela and Iran. Also expect nothing to happen. Oh you might here announcements of “cooperation” but when everyone goes home mothering will change. Saudi Arabia will continue pumping at record levels. Russia will continue pumping at record levels. All the other countries are pumping as much as their war torn countries will allow. And all of them need money in their coffers. Reuters reported today that Saudi Arabia has proposed to cut their production. That is if Iran agrees to not increase its production. Ain’t gonna happen.

WTI is down 29¢ on lower equities. Yawn.

Courtesy of MDA Information Systems LLC

Natural Gas

After pushing to a 16 week high just below $3.10 natural gas prices slipped yesterday closing down 6.7¢ at $2.990. The driver was a bearish EIA weekly storage report. The market was looking for a 46 Bcf injection with the actual number injection 52 Bcf. Last year for this week we had a 96 Bcf injection. The “below average” injections have been the trend all summer because we began the injection season with storage levels way above normal due to the warm winter. The electric generation sector has always been the swing market for natural gas and prices must go low enough to displace coal. This in economic terms is called “substitution.” Aren’t free markets great?! Current storage levels are still greater than last year and the 5 year average, 4% and 8%, respectively.

The jet stream induced ridge remains well entrenched across the eastern U.S. allowing warm Gulf air to flow north resulting in continued above normal temperatures. That being said, it’s late September and average temperatures are decreasing which will mean that even with above normal temps A/C loads will be dropping. You folks in the north are looking at some great weather. This morning traders are playing it conservatively before the weekend taking some chips off the table and natty is down 2.8¢. Chatter.

Elsewhere

Coming to a state near you. A VMT. That would be a Vehicle Miles Traveled Tax. For years policy makers have been grappling with balancing expenditures for road construction and repairs, which have been increasing, with revenue from fuel taxes, which have been stagnant to lower. Revenues haven’t increased because of the increase in the fuel efficiency of vehicles. Add in the potential growth of hybrid and electric vehicles and you can see the dilemma. Consequently, policymakers have had to divert billions from general funds and other funds to pay for infrastructure. In response, the VMT. The VMT is a mileage based tax. There are different ways a VMT can be implemented but the one gaining acceptance is to use an onboard vehicle device to capture the distance driven by the vehicle through GPS or other technology and relate that to a method of charging the owner of the vehicle. One of the big hurdles has been the issue of privacy. Opponents to the tax say the VMT is an invasion by “Big Brother” because vehicle location data is utilized. Additionally, data collection and charging systems pose a risk to private information being hacked. The privacy issue is being addressed in numerous ways including, for example, only collecting data at certain intervals.

The bottom line is this new method of taxing is catching on. Oregon began a test program last summer and three months ago California launched a pilot program. Get ready. It’s coming to a theater near you!