Equities and the economy:

Yee-haw! It feels like I’m watching the bull riding competition at the Houston Rodeo. Down, up, down. A third consecutive day of volatility greater than 1%. Yesterday the Dow sunk 258 points, 1.41%, closing at 18,066, the S&P 500 fell 32, 1.48%, to 2,127 and the Nasdaq ended down 57, 1.09%, at 5,155. As a bit of trivia, this is the first time since 1963 when we’ve had 3 straight days of at least a 1% move following an extended period of calm (43 days), and that was the 2 day period before and immediately following the assassination of John F. Kennedy in November 1963. The excuse for yesterday’s drop was a fall in oil prices but as I’ve mentioned too many times, we’re way over due for a pullback (note I didn’t say correction). You knew this was coming. We just didn’t know when. One of the famous economist John Maynard Keynes statements was “a market can remain irrational far longer than I can remain solvent.” The point here is that markets don’t go straight up or straight down. The S&P is still up about 4.1% for the year which extrapolates to over 6% for all of 2016. And remember, this is on the heels of double digit gains in 2014 and 2015. Currently there’s a lot of anxiety in the market, the highest since the Brexit vote, and confusion breeds contempt which is another way of saying investors reduce risk. And the probability of an interest rate increase at next week’s meeting fell to an even lower number, 15%, yesterday. By the way, the Bank of Japan announced yesterday it may move interest rates further into negative territory. This is like you having to pay the bank to hold your money. For the last 7 years it’s been a global musical chair event on who can devalue their currency more. It began with the Fed’s QE and spread around the world (PIIGS and Europe and Japan). Only recently here in the U.S. has talked been of tightening monetary policy, and that is from one that has been incredibly loose.

Americans got a raise last year! Per the Census Bureau, the typical U.S. household’s income rose 5.2% in 2015 to $56,516. This was good to see for middle-class incomes had seen little improvement since the recession ended in 2009, even as the unemployment rate fell and hiring picked up. Obviously there has been a lot of slack in the labor market over the past 6 years, which is now tightening (Fed is taking note). Median incomes picked up in all regions of the U.S., across all age groups and for most ethnic and racial groups. The proportion of Americans in poverty fell sharply last year to 13.5% from nearly 14.8% in 2014. In fact, the poorest Americans saw the largest income gain.

This morning, and for the first time since mid-last week, calm is in the market with the Dow down 20 points.

Oil

Oil markets took a hit yesterday with the IEA (not our EIA) flip-flopping on its original call for the oil market to rebalance in 2017. The agency is now saying that it expects oil stockpiles to continue to build next year given that “oil demand growth is slowing at a faster pace than initially predicted,” while demand in Europe, China and India has fallen faster than expected. Per Matt Perry, IEA senior oil economist, “Both Chinese and European oil demand growth have all but vanished by Q3 2016. Additionally, OPEC revised its output higher despite a possible out freeze by some nations (which I don’t believe will happen). The day ended with WTI down $1.39 at $44.90 and Brent at 447.10, down $1.22.

This morning the pressure continues with WTI off 64¢.

Courtesy of MDA Information Systems LLC

Natural Gas

After some big gains recently natty closed pretty much unchanged yesterday settling down 0.6¢ at $2.909. As I mentioned yesterday, the cash market has been very strong of late partly due to the above normal temperatures in the eastern U.S. supporting demand compounded by almost 1 Bcf/d of maintenance. September and October are the big maintenance months as pipelines and suppliers prepare for winter. It’s Groundhog Day on the forecast with continuing much above temperatures for the Mid-Atlantic and northeast. However, those “averages” are dropping every day so as we go further into the month the “much aboves” will result in less and less cooling degree days. i.e. natural gas demand. Bottom line is those much aboves are going to produce some phenomenal weather!

This morning natty started out strong up 9¢ but has backed off being up 1.5¢ as I write.

Elsewhere

I’m sure there are many of you who have considered or tried to manage your weight, i.e., a diet. Well I thought I’d share with you my progress.

My goal for 2016 was to lose 10 pounds. I’ve only got 15 to go!

I ate salad for dinner over the weekend. Mostly tomatoes, vegetables, protein, some cheese and croutons. Really it was a big round crouton covered with tomato sauce and cheese. Ok! Fine! It was a pepperoni pizza.

How to prepare Tofu: A) throw it in the trash; B) Grill some meat. Enjoy!

I did a week’s worth or cardio after having walked into a spider web.

I don’t mean to brag, but I finished my 14 day diet food in 3 hours and 20 minutes.

And here’s a little a relationship advice I discovered regarding diets. A recent study found that women who carry a little extra weight live longer than men who mention it.

On a logistical note, the author will be traveling the next couple of days and the next Morning Energy Blog will be on Monday.