About Currency Currents

With Currency Currents, you can stay tuned-in to our current global-macro view and our analysis of key investment themes driving currency prices.

We consistently focus on the key asset classes responsible for the flow of global capital -- including equities, fixed income, commodities and, of course, currencies.

Nothing is off limits to us in this free-wheeling look at the markets. Some days you’ll receive ramblings on trading psychology, while other days we may take an academic approach in explaining esoteric economic issues. Ultimately we have one goal in mind: to help you get a handle on the key investment themes driving global capital flow. Because if you know where the money is going, it increases the probability that your position in the market will be a profitable one.

Who is Jack the Pipper?

Jack Crooks is Black Swan Capital LLC, President and Chief Trading Officer.

Jack is founder and president of Black Swan Capital LLC. He has also operated a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. In addition, he was general partner in a firm specializing in currency futures and commodities trading. Neither firm is now in operation.

Prior to entering the investment arena, Jack worked in various corporate finance positions. He has written extensively on the subject of global currencies and international economics.

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Short squeeze over? Crude oil fundamentals to overwhelm geopolitics ...

Posted 11 months ago | 11:14 PM | 05 Jul 2012

Quote

"Fools make researches and wise men exploit them." -H.G. Wells

Of Interest

China's manufacturing growth weakens as new orders drop (Businessweek)
China Lowers Interest Rates for Second Time in a Month to Bolster Economy (The Telegraph)
Hit at home, China's ghost fleet sails high seas (Reuters)

Commentary

Geopolitics were said to have played a role in crude oil's recent price spike. An Iranian official allegedly said Iran would move to block the Strait of Hormuz for those complying with US-led sanctions. The US military sent some ships (minesweepers) to the region should Iran act. And, of course, the situation in Syria has the potential to further intensify the conflict between Iran and the West. To some degree, it seems Saudi Arabia is alleviating some geopolitical premium in crude prices, as the world's top producer has not pared back its production despite a pullback in demand.

And that pullback in demand is very real -- China, the second largest energy consumer in the world, is seeing its gasoline refiners cut runs by 2% per day to trim back inventories. This comes on the back of a dip in Chinese crude oil demand in April (first in 3 years or so), followed by only a tepid rebound in May. And since we think the global economy is still downshifting, crude oil demand is likely to remain a weight on price.

Action

Traders have become well aware of these bearish fundamentals. So aware, the speculative short position in crude oil futures recently grew to the largest since September 2011. This suggests the magnitude of the move we saw in the past few trading sessions has more to do with short positions getting squeezed than it does with geopolitics. Is the squeeze over? Maye, maybe not. Either way, crude oil could very quickly drop to test the $70 per barrel level. One way to play for such a move is by using shares of the PowerShares DB Crude Oil Double Short ETN (symbol DTO). [Note: our members were issued a specific alert earlier today to take action on this idea. You can subscribe now to become a member, receive specific alerts, and continue getting Market Vitals - this sneak peak comes to an end tomorrow.]