Equities and the Economy:

• Dow ends 5 session skid.
• Market remains range bound.

After five consecutive losing sessions U.S. stocks finished higher on Friday with the Dow closing up 95 points, 0.48%, the S&P 500 adding 8, 0.34%, ending at 2,271 and the Nasdaq climbing 15 points, 0.28%, ending at 5,555. However, caution is the order of the day. For the week the Dow and Nasdaq lost 0.3% and the S&P fell 0.2%. It was the second straight weekly decline for the Dow and S&P. The market continues to be range bound with support around 2,215 and resistance around 2,280 basis the S&P. Everything in between is chop. Remember, we’re in a bull market and it’s a “buy the dip” mode. Weekly jobless claims are at their lowest level in decades, the consumer price index rose to 2.1% in December on a y-o-y basis and it’s not just the U.S. economy that’s improving but also data is showing Europe’s and China’s economies are also improving.

There was no fundamental economic news of significance released Friday, and none is scheduled for today which is surprising so let’s move on to this morning. Asian stocks closed mixed and the European stocks are on the defensive with the major indexes there trading lower which is weighing some on the U.S. indexes with the Dow down 65 points.

Oil

• Oil prices close higher on Friday.
• Close very marginally higher for the week.

The February Nymex WTI contract closed up $1.05, 2%, on Friday at $52.42 which was also the expiration of the contract. Brent settled up $1.33 at $55.49. For the week WTI rose a very marginal 0.1%. The big news Friday came in Baker Hughes’ weekly Rig Count report. The company reported a whopping increase of 35 rigs w-o-w in the U.S. (29 oil and 6 natural gas). This was the largest w-o-w increase since April 2013! Once again the Permian led the pack with an increase of 13 rigs. As I mentioned previously, half the rigs in America are working in the Permian. Two weeks ago we saw a slight decline in the rig count, 5, but prior to that we had 10 consecutive weeks where the rig count increased. The current rig count, 694, is the highest in level in 14 months. Even the Bakken, the most expensive shale play in America to produce, saw an increase of 3 rigs last week. It’s evident that U.S. oil & gas companies can make money, albeit not huge amounts, with oil around $53.

Over the weekend Saudi Arabia’s oil minister Khalid Al-Falih said that OPEC members have reduced oil supply by 1.5 million bpd in January which is about 80% of the quota. Also, it’s been decided that that those countries that agreed to cuts will have to report total levels of output by the 17th of the month to a central monitoring committee.

This morning WTI is being dragged down by lower equities with the March contract first day as the prompt month down 42¢.

Natural Gas

• Warmer forecast.
• Prices get smacked.

The noon forecast update turned warmer which brought the bears out of their caves mauling the market pushing the February natural gas price down a whopping 16.4¢, 5.4%, settling at $3.204. Traders are getting materially different signals from the private forecasting services. MDA is showing February to be normal in the northern half of the country and above normal in the southern half. WSI is forecasting February to be down-right cold across the entire nation! Can’t wait to see who’s right! I’m not sure what February holds for us but I can tell you that no significant cold weather is in store for the next couple of weeks. In fact, the 1-5 day and 11-15 day time frames are very warm relative to normal. With the weather forecasts confusing so is the market and natty is up a meaningless 1.1 ¢.

Elsewhere

America’s most expensive home just hit the real estate market. The home is in the Bel Air area of Los Angeles and can be yours for merely $250 million. The developer, Bruce Makowsky, just put the finishing touches on the 38,000 square foot, 4 level, 12 bedroom, 21 bath, 3 gourmet kitchen, 5 bar, 2 commercial elevator, massage studio/wellness spa, fitness center, James Bond themed, 40 seat theatre home. The main outdoor deck features an 85 foot Italian glass infinity pool, a swim up bar, a pair of mini Sea-Doos and a small catamaran. At the flip of a switch a massive outdoor hydraulic theater-sized screen emerges. Below the infinity pool is a sprawling auto gallery with more than $30 million in cars and motorcycles. There are 130 art installations including an interactive digital work that stars Disney’s Seven Dwarfs (remember, we’re in LA) and a champagne pinball machine. Next to the 4 lane bowling alley is a massive $200,000 candy wall.

Several tons of breathtaking stone and marbles (50 different types) flown in from Verona, Italy adorn the bathrooms. There’s even a full size “sculpture” (it’s inoperable) of the helicopter from the 80’s show Airwolf sitting on the rooftop helipad. Accents throughout the house include Dom Perignon filled fire extinguishers.

Makowsky points out the 2016 luxury market was very strong in 2016 with two separate $100 million homes sold. He’s is under no illusions how tiny the target market is for his home. He estimates there are only about 3,000 buyers in the world who could afford the home.

See the house here.