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Wednesday, February 10, 2010

API On Crude

I'm expecting to lose power later in the day due to a combination of high winds and heavy snow on tree limbs, so I may not be posting for a bit.

I don't think we are getting our normal crude inventory report for Feb 5th (due to snow), but API did report yesterday after the market close that there was a huge build in crude:
After market close, the industry-sponsored API reported crude oil inventory surged +7.2 mmb, the biggest increase since October 2009, in the week ended February 5. Gasoline stockpile also added +1.6 mmb while distillate stockpile drew -1.5 mmb. The huge crude build was driven by low refinery runs despite reduction in imports. This sent the market a bearish signal that demands for oil product remained dismal.
I downloaded the Bundesbank report for January for light reading on batteries. Must have number fix:
The recovery in the German economy is likely to have continued in the fourth quarter of 2009, albeit at a significantly slower pace. While the external sector continued to generate stimuli, domestic activity had a retarding influence. Despite a consumer climate that is still largely intact, household expenditure, in particular, is likely to have decreased again significantly in real terms. This is suggested at all events by the sharp decline in motor vehicle registrations, which had previously been boosted by the environmental premium, and rather weak retail sales. No significant impetus was generated by fixed capital formation either, and the positive contributions resulting from the inventory cycle are likely to have eased off markedly. The lack of a further rise in new orders, the decline in imports and the interrupted improvement in mediumterm business expectations suggest that the losses in industrial demand due to the discontinuation of the government car scrapping scheme will not be fully offset in the near future.
Industrial production in France and Italy surprised on the low side. The only thing that's roaring along is China, but given that Chinese new loans in January are reported at 1.6 trillion yuan, it's blindingly obvious that this is a bubble that carries the seeds of its own destruction. (At this stage in a bubble, money is running into the bubble not just from bank lending but because it is being diverted from other economic activity.)

So yes, Chinese imports were reported very high on strengthening internal demand - but the internal demand comes from bubble money.

If my power holds out, I'll post some things about 1929 in the US in the lead up to the crash this afternoon.

This is eerie - it is like watching some sort of movie of the 1929 collapse made in China with Chinese actors. Goldman Sachs was reported this morning to be selling some property in Shanghai, so I think the end is nigh.

The concern over Europe and government deficits really arises from this problem. No one knows where 2011 growth is coming from, if it is not coming from the US and Europe.

Snarky Mark normally has good coverage of China, and he is oddly Galbraith-like in his way of presenting it. Never has so much economic idiocy deserved dry snark as now.


If my power holds out, I'll post some things about 1929 in the US in the lead up to the crash this afternoon.

For what it is worth, here's something I heckled back in November of 2007.

Savvy Chinese Know Exactly When Bubble Will Burst!


“Before the Olympics are over next year, just like before the return of Hong Kong (to China), as long as it hasn't happened yet, the market won't collapse. That's the main policy.”

Zhu's attitude is common among retail investors – that because of Beijing's desire to present a good face to the world when it hosts the Summer Olympics next August, it will come to the rescue should the market suffer any major volatility.

Just two problems with that theory of course.

First, The United States was on top of the world in 1929. We hosted BOTH the Summer Olympics AND the Winter Olympics during our Great Depression (1932). Oops!

Second, hindsight. China's Shanghai Composite Index peaked on October 16, 2007. It hit 6,092.06. It's now trading at 2,982.50.

It's still a bubble in my opinion, mainly because the Chinese are so sure their government can continue to prop up their real estate market. Good luck on that one!
Thanks for an excellent overview MoM.
I'm still not sure the global nature, due to trade links, of this problem is entirely appreciated. THe markets seem to be trundling along from crisis pocket to crisis pocket - Dubai, now the PIGS, next China?- and behaving as if they are isolated and containable problems.
Wonder where, and how, all this will end.
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