The Market And Energy Page, T+356 -- January 12, 2018

Updates

Later 2:21 p.m. CT: coming up dry. Bloomberg is reporting that "hope wanes for 'elephant' oil discoveries in Norway's Arctic.

After a disappointing year for drillers, Norwegian authorities are reviewing their hopes for the Nordic country’s hottest exploration area.

“In the part of the Barents Sea that’s currently open, you’ve sort of tried the elephants -- the big opportunities,” Bente Nyland, the head of the Norwegian Petroleum Directorate, said in an interview. “You’re now down to the next generation in size.”

That means the industry regulator would be happy with any discovery of about 500 million barrels of oil, she said. That’s a far cry from the multibillion barrel deposits discovered in the North Sea, which have helped Norway become one of the world’s richest countries over the past decades.

Later, 10:45 p.m. CT: market now up more than 202 points. Most interesting, CNBC seems to be spending more mid-day reporting on political events than the huge news the stock market is making. 

Later, 9:36 p.m. CT: market is up 175 points in early trading. And CNBC is back to trying to talk the market down. Quite amazing. The talking head, a former Federal reserve member, again brings up the "synchronized global economy," and took forever to get to the Trump tax bill -- which he did not mention by name.

Flashback: from Bloomberg, November 12, 2017 --

No matter which theory of flattening you subscribe to, the world’s biggest bond market is sending a signal that traders can’t ignore. The longer the trend continues, the more likely its effects could spread to bank earnings and the real economy, while at the same time it would limit the Fed’s ability to respond when these risks emerge.

Today, with the Dow up almost 200 points (after a 205-point surge yesterday after 70+ Dow records this past year, absolutely no mention of the flattening yield curve. In fact, bank earnings coming in today are quite good.

Treasury yields, most recent:

• 10: 2.54 (delta, 10 year - 2 year: 0.56)
• 5: 2.32 (delta, 10 year -5 year: 0.22)
• 2: 1.98

One year ago:

• 10: 2.42 (delta, 10 year - 2 year: 1.19)
• 5: 1.93 (delta, 10 year year - 5 year: 0.49)
• 2: 1.23

Original Post

WTI: $63.40

Misspoke: did Robert Kaplam, CEO of the Federal Reserve Bank of Dallas mispeak? He clearly stated that the Permian accounted for 70% of US crude oil production -- at least that's what I clearly heard in his interview with Steve Liesman, CNBC, this morning. Impossible. Maybe he meant that 70% of US crude oil production INCREASE in the US in 2018 will come from the Permian since in his next statement he said that the Permian will increase production by 700,000 bopd in 2018.  From the EIA:

Dow futures: up 110 points after a 205-point gain yesterday after 70+ Dow records set in the past year. Even Jim Cramer says he was surprised by some of the gains yesterday, singling out CVX as just one example.

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on anything you read here or think you may have read here.

Waterboarding: "... the waterboarding of the American economy ended on November 8,2016." -- Joe Kernen, CNBC.

Tedious: I guess we got the answer to the question that CNBC talking heads asked ad nauseum whether the stock market had "baked in" the tax bill before it was even passed. Clearly, the stock market had not "baked in" the tax bill before it was passed. Interestingly enough, even after the bill passed, it took several weeks for investors to understand what really happened, at least based on the market yesterday and what futures are showing today. What caused the 205-point Dow surge yesterday and Dow futures suggesting another 3-digit gain today? Two things:

• Becky Quick's interview with Warren Buffett on Wednesday, January 10, 2018 (date?)
• Fiat Chrysler's incredible announcement yesterday

Blog: why I love to blog. Yesterday I noted that the Fiat Chrysler announcement meant that de facto NAFTA was dead. In an early morning interview on CNBC earlier this morning Joe Kernen said the same thing: regardless of what actually happens "officially" with NAFTA, the Fiat Chrysler suggests that NAFTA is dead.

Pickens: closes his two funds. Various reasons cited.

JPMorgan: beats; $1.76 vs $1.69. This is huge. The company had said it would take a "huge" hit after the tax bill passed. "Trading was down sharply year-on-year."  JPMorgan's effective (?) tax rate in 2017 was 30%; in 2018, the effective (?) tax rate will be 19%. According to CNBC analyst, there were a lot of "one-offs" in JPM's 4Q17 earnings report. But, the new tax rate is permanent -- that is not a "one-off." JPMorgan was trading slightly lower (futures) but is now trading up (futures), near a new all-time high.

Shortage of shares: Jim Cramer has been beating the "shortage of shares" drum for the past several weeks. Now, Dick Bove used the very same phrase, "shortage of shares," when discussing investment banking. He thinks that investment banking will do very well this year. Again, see disclaimer above.

GM: will debut self-driving car without steering wheel in San Francisco in 2019. It certainly seems GM has leap-frogged Tesla. Tesla is concentrating on EVs while GM and others have moved well beyond EVs. In fact, the Tesla Model S looks absolutely "ancient" when compared to the graphic below. Wow, technology is moving quickly. Reuters link here.
Heidi: when it comes to infrastructure spending, it sounds like Heidi has no concern with deficit spending. She loves fracking, hydrocarbons, crude oil, economic growth -- Joe Kernen says she sounds like a Republican. 

GDP forecast: latest forecast -- 2.8% for 4Q17-- January 10, 2018

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 2.8 percent on January 10, up from 2.7 percent on January 5.

The forecasts of the contributions of net exports and inventory investment to fourth-quarter real GDP growth increased from -0.63 percentage points and -0.46 percentage points, respectively, to -0.60 percentage points and -0.42 percentage points, respectively, after this morning's report on import and export prices from the U.S. Bureau of Labor Statistics and this morning's wholesale trade release from the U.S. Census Bureau.

Next forecast: to be released today.

**********************************

Back To The Bakken

Active rigs:

$63.40↓	1/12/2018	01/12/2017	01/12/2016	01/12/2015	01/12/2014
Active Rigs	54	36	54	156	192

RBN Energy: streamlining Permian water delivery and produced water takeaway, part 2.