Iran, Trump and uncertainty

Daily Analysis - 05/01/2018

The weekend has much in store for thought and consideration

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As is usual for professional and avocational traders alike, the weekend is the time for reflection and regrouping. The business of trading profitably in the capital markets ain’t easy. To take money out of the pockets of your competitors, and remember, this is indeed a zero sum game: Your profits are someone else’s losses, and vice versa, you need a plan of action. Otherwise you are lost. Like a ship without a rudder. You may not always reach your destination but, following a plan or a course, you will know how where you ended up, how off course you strayed and, with time and focus, why your plan did not work.

Iran, oil and nerve.


The demonstrators in Iran are not only demonstrating great nerve and boldness in their expressions of discontent with their corrupt, backward and negligent government of theocrats and autocrats, the world too is showing nerve in what is developing into some kind of backbone (nerve) too. Hardly awe inspiring but nerve nonetheless. Oil prices are not surging away. The world’s leadership is not acting silently pretending what is going on in Persia is irrelevant, as they do so often in life (See the Royhinga slaughter in Southeast Asia for an awful example.) So far the price per barrel of oil is holding around $60. This despite a drawdown of double the expected reduction yesterday in the Crude Oil Inventory Report produced by the International Energy Agency in the US. Supply disruptions in the Iranian pipeline so far seem unlikely according to the sources we connect with. This is because the demonstrations are not near oil facilities. But also because the regime is not going to let the disturbances effect what is already a cash-strapped fiscal condition. One the reasons for so much discontent is the fact that the Mullahs have squandered so much of the country’s wealth, particularly that cash freed up with the lifting of sanctions related to the silly nuclear program, ridiculous adventures in Syria, Yemen, Lebanon and beyond. Reducing oil imports is not in the cards. If, that is, the world does not impose such restrictions on the Iranians. This would come as a result of more severe reactions to and treatment of the demonstrators by the venal leadership of the state. Do your homework this weekend. Read the Eurasia Group’s work. Read. This is an important development we should all be well informed about.

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Gold falling.


In what could be considered a vote of confidence for the cause in Iran, the gold price is not flying up in what one might expect in a reaction to a situation as volatile as this. Gold is currently 1318 an ounce and falling. Surprising yet somehow reassuring. This is not to say that it cannot revert to a sharp rise if the Supreme Supreme leader does become more repressive (why can’t these dictators just be satisfied with being called the leader. Let’s lose the Supreme bit already. Iran’s constitution refers to this potion simply as “Leader”. That ought to do it, no?) Learn the pattern in the gold price to see and understand the correlations between unrest, uncertainty and the price of this commodity.

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GBPJPY USDJPY


The Yen is weakening across the board. The trend is in train and likely to continue. The charts of the JPY versus the GBP and the USD show continuing weakness of the Japanese currency starting with the weakening in mid-November and continuing to the present moment. This could be a result of the highly sensitive condition of the Japanese economy to the oil price as every barrel of oil consumed in Japan is imported. Too, leave us not forget that Dear Leader (Again: Isn’t “Leader” enough for these guys?) Kim’s missile tests fly over Japan. The Japanese have reinstituted air raid and sheltering drills. This is never a good sign for currency strength. Noises are appearing on the radar that Kim may well settle down and talk to his South Korean neighbors. Too, the US, South Korea and Japan agreed yesterday to suspend military exercises in the region until after the winter Olympics in South Korea next month. Another situation worthy of thought, research and understanding. The North Korean situation is, in our estimation, the single most volatile matter on the world’s geopolitical agenda. Bar none.

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Veolia strong on post hurricane investment in US


Veolia, one of the world’s premier environmental and resource companies has announced a large investment in a project in Burnside Louisiana, to create a sulfur regeneration plant. This operation will provide sulfuric acid regeneration services to refineries and produce various sulfur based products. Much of the refining industry was severely damaged in the US during hurricanes Harvey and Irma and Veolia is stepping in to capitalize on the damage. The stock price reflects the market’s perception of the prospects for this investment. Veolia UP.

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