Dalio Says Bonds Face Biggest Bear Market in Almost 40 Years

Billionaire hedge-fund manager Ray Dalio said that the bond market has slipped into a bear phase and warned that a rise in yields could spark the biggest crisis for fixed-income investors in almost 40 years.

“A 1 percent rise in bond yields will produce the largest bear market in bonds that we have seen since 1980 to 1981,” Bridgewater Associates founder Dalio said in a Bloomberg TV interview in Davos on Wednesday. We’re in a bear market, he said.

A Treasury selloff extended following Dalio’s comments, pushing 10-year yields through 2.65 percent, near the highest since mid-2014.

Dalio predicted that the Federal Reserve will tighten monetary policy faster than they have signaled, and said that economic growth is in the late stage of the cycle but could continue to improve for another two years. The current economic environment is good for stocks but bad for bond investors, said Dalio, who’s chairman of Bridgewater, the world’s biggest hedge fund.

“It feels stupid to own cash in this kind of environment. It’s going to be great for earnings and great for stimulation of growth,” he said.

That spurt will last for about 18 months and the central bank will then feel like it has to tighten monetary policy faster than the discounted yield curve, he said. That will be a negative for asset prices, he said.

Demand for bonds will fall as central bankers reduce monetary stimulus, but larger deficits mean that governments will need to sell more of the securities to raise money, Dalio said. That supply-demand imbalance will concern the central bankers, he said.

Bridgewater manages about $160 billion, according to its website.

    Source: http://www.bloomberg.com/

    Jim Rogers Says Next Bear Market Will Be Worst in His Life

    Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he’s lived through.

    The veteran investor says that’s because even more debt has accumulated in the global economy since the financial crisis, especially in the U.S. While Rogers isn’t saying that stocks are poised to enter bear territory now — or making any claim to know when they will — he says he’s not surprised that U.S. equities resumed their selloff Thursday and he expects the rout to continue.

    “When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers, the chairman of Rogers Holdings Inc., said in a phone interview. “Debt is everywhere, and it’s much, much higher now.”

    The plunge in equity markets resumed Thursday, as the S&P 500 Index sank 3.8 percent, taking its rout since a Jan. 26 record past 10 percent and meeting the accepted definition of a correction. The Dow Jones Industrial Average plunged more than 1,000 points, while the losses continued in early Asian trading Friday as the Nikkei 225 Stock Average dropped as much as 3.5 percent.

    Rogers has seen severe bear markets before. Even this century, the Dow plunged more than 50 percent during the financial crisis, from a peak in October 2007 through a low in March 2009. It sank 38 percent from its high during the IT bubble in 2000 through a low in 2002.

    Rogers predicts the stock market will experience jitters until the Federal Reserve increases borrowing costs. That, he says, will be the point when stocks go up again. He said he’ll buy an agriculture index today, reiterating his view that prices of such commodities have been depressed for some time.

    “I’m very bad in market timing,” Rogers said. “But maybe there will be continued sloppiness until March when they raise interest rates, and it looks like the market will rally.”

    (A previous version of this story corrected the quote in the last paragraph to say "sloppiness.")

      Source: http://www.bloomberg.com/

      The Glut Strikes Back as Oil Returns to Brink of Bear Market

      The bullish spirit that gripped oil traders as industry giants from Saudi Arabia to Goldman Sachs Group Inc. declared the supply glut over is rapidly ebbing away.

      Oil is poised for a drop of 20 percent since early June, meeting the definition of a bear market. While excess crude production is abating, inventories around the world are brimming, especially for gasoline, and a revival in U.S. drilling threatens to swell supplies further. As the output disruptions that cleared some of the surplus earlier this year begin to be resolved, crude could again slump toward $30 a barrel, Morgan Stanley predicts.

      The tables are turning on the bulls, who were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. Its probably going to take a little longer than they expected.

      Oil almost doubled in New York between February and June as big names from Goldman and the International Energy Agency to new Saudi Energy Minister Khalid Al-Falih said declining U.S. oil production and disruptions from Nigeria to Canada were finally ending years of oversupply. Prices are set for their biggest monthly loss in a year amid a growing recognition the surplus will take time to clear.

      For a story on challenges the new OPEC chief may face, click here.

      Theres lots of crude and refined products around, said David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. Demand growth has faltered a bit.

      The stockpiles of crude and refined oil that built up in industrialized nations during the years of oversupply remain formidable, standing at a record of more than 3 billion barrels, according to the Paris-based IEA. Traders struggling to sell cargoes are hoarding the most barrels on board tankers at sea since the end of the 2008-2009 financial crisis, the agency estimates.

      In some countries the glut seems to be getting bigger, with weekly U.S. government data on Wednesday showing a surprise inventory increase in the worlds biggest oil consumer at at time when summer driving demand should deplete stockpiles.

      The latest challenge for the market is a shift in the surplus from crude to products, Jeff Currie, head of commodities research at Goldman Sachs in New York, said in a Bloomberg Television interview Wednesday. Refiners churned out gasoline earlier in the year to take advantage of cheap crude, and stockpiles of the motor fuel are now at the highest for the time of year in at least 20 years, EIA data show.

      The next move lower could come as crude production ramps back up, said Adam Longson, an analyst at Morgan Stanley in New York. Canadian oil-sands producers have restored what was halted in May when wildfires menaced more than 1 million barrels of daily output. Nigeria has partially recovered after militant attacks curbed production to a three-decade low, according to the IEA.

      In the U.S., production declines have leveled off over the past three weeks, EIA data shows. The weekly count of active oil rigs published every Friday by Baker Hughes Inc. has recorded its longest run of increases since August.

      Hidden Surplus

      Did the glut disappear in the first place? asked Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. It was masked for a while by the shortfalls in Nigeria and Canada, but it did not disappear.

      Still, banks from Citigroup Inc. to Barclays Plc and Societe Generale SA are confident the overall re-balancing of the market remains on track, despite the current price retreat, and that markets will recover by the end of year. The latest sell-off reflects the strength of the dollar, which curbs investors appetite for commodities, rather than any worsening of supply-demand fundamentals, according to Goldman Sachs.

      I would call it a bump on the road towards a looming rebalancing, said Miswin Mahesh, an analyst at Barclays in London. The supply side is adjusting sharply and we will see it slow down a lot faster than demand from the fourth quarter onwards. The low price is creating a one-two punch moment for the supply side, taking off both current and future supplies.

      The recovery will take prices up to $50 a barrel by the end of the year, according to Barclays and Commerzbank. In the meantime however, sentiment has soured so much that further losses to $40 are inevitable, Commerzbanks Weinberg said. West Texas Intermediate crude futures lost as much as 1.4 percent to $40.57 a barrel on Friday.

      The oversupply will diminish, Weinberg said. But the market is deaf in one ear right now. Sentiment was too pessimistic at the beginning of the year, extremely bullish in June, and now back again to pessimism.

      Source: http://www.bloomberg.com/

      Jim Rogers Says Next Bear Market Will Be Worst in His Life

      Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he’s lived through.

      The veteran investor says that’s because even more debt has accumulated in the global economy since the financial crisis, especially in the U.S. While Rogers isn’t saying that stocks are poised to enter bear territory now — or making any claim to know when they will — he says he’s not surprised that U.S. equities resumed their selloff Thursday and he expects the rout to continue.

      “When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers, the chairman of Rogers Holdings Inc., said in a phone interview. “Debt is everywhere, and it’s much, much higher now.”

      The plunge in equity markets resumed Thursday, as the S&P 500 Index sank 3.8 percent, taking its rout since a Jan. 26 record past 10 percent and meeting the accepted definition of a correction. The Dow Jones Industrial Average plunged more than 1,000 points, while the losses continued in early Asian trading Friday as the Nikkei 225 Stock Average dropped as much as 3.5 percent.

      Rogers has seen severe bear markets before. Even this century, the Dow plunged more than 50 percent during the financial crisis, from a peak in October 2007 through a low in March 2009. It sank 38 percent from its high during the IT bubble in 2000 through a low in 2002.

      Rogers predicts the stock market will experience jitters until the Federal Reserve increases borrowing costs. That, he says, will be the point when stocks go up again. He said he’ll buy an agriculture index today, reiterating his view that prices of such commodities have been depressed for some time.

      “I’m very bad in market timing,” Rogers said. “But maybe there will be continued sloppiness until March when they raise interest rates, and it looks like the market will rally.”

      (A previous version of this story corrected the quote in the last paragraph to say "sloppiness.")

        Source: http://www.bloomberg.com/

        Oil Bear Market Attracts Record Bets on Further Price Slide

        Hedge funds have gone all-in on lower oil prices, counting on seasonal weakness to play out again this year.

        Money managers increased wagers on declining crude prices to a record as futures dropped to the lowest in more than three months. U.S. crude inventories climbed for a second week as imports arrived at the fastest pace since 2012. The supply gain comes on the cusp of seasonal refinery maintenance that will curb crude demand. Futures have declined in each of the past five Septembers.

        “Were are entering a period of seasonal maintenance, which should put some downward pressure on prices,” said Scott Roberts, co-head of high yield investments and manager of $2.7 billion at Invesco Advisers Inc. in Atlanta. 

        Hedge funds increased their short position in West Texas Intermediate crude to 218,623 futures and options combined during the week ended Aug. 2, the highest in data going back to 2006, according to the Commodity Futures Trading Commission. 

        WTI closed 22 percent below its June peak on Aug. 1, meeting the common definition of a bear market. It dropped 7.9 percent to $39.51 a barrel in the report week, and closed at $41.80 on Aug. 5.

        U.S. crude supplies rose to 522.5 million barrels as of July 29, the highest seasonal level in decades, Energy Information Administration data show. Imports climbed to 8.74 million barrels a day, the most since October 2012.

        Refinery Rates

        Refineries operated at 93.3 percent of capacity in the week ended July 29, the highest since November. Refiners typically bolster their operations in June and July to meet peak gasoline demand before ratcheting back in August. Over the past five years, refiners thirst for oil has dropped an average of 1.2 million barrels a day from July to October.

        “Refinery margins are weak, global demand growth is decelerating and theres upcoming seasonal weakness for both crude demand and product demand,” Mike Wittner, head of oil market research at Societe Generale SA in New York, said on Bloomberg Television Aug. 4. “To me it has a taste of the classic autumn downturn.”

        Technical factors are also weighing on crude prices. WTI settled below the 50, 100 and 200-day moving averages on Aug. 1 for the first time since February.

        The market has further to fall before hitting key support, according to Paul Ciana, a technical analyst at Bank of America Merrill Lynch in New York. “We need to form a bottom in the mid-to-upper $30s before we move back towards $52.”

        Bearish Bets

        Money managers short position in WTI rose 38,489 futures and options and have almost doubled in the past three weeks, CFTC data show. Longs, or bets on rising prices, increased 1.6 percent, while net longs dropped 28 percent to the lowest since January.

        In other markets, net-bearish bets on gasoline fell 20 percent to 4,081 contracts. Gasoline futures fell 2.5 percent in the report week. Net-long wagers on U.S. ultra low sulfur diesel dropped 44 percent to 7,163 contracts. Futures slipped 5.1 percent. 

        Reversal Higher

        Not everyone is on the bearish bandwagon.

        The influx of bearish bets from money managers may leave the market vulnerable to a rebound. The past three peaks in short bets have been followed by price gains ranging from 29 percent to 95 percent.

        The oil market is poised for a violent reversal” upward, oil trader Andy Hall wrote to investors in his Stamford, Connecticut, hedge fund, Astenbeck Capital Management LLC. “Funds have made a significant amount of money getting short oil in the last few weeks and people will want to take some profits off the table as we approach levels which will only accelerate U.S. production declines.”

        Read more: http://www.bloomberg.com/news/articles/2016-08-07/oil-bear-market-attracts-record-bets-on-further-price-slide

        The Glut Strikes Back as Oil Returns to Brink of Bear Market

        The bullish spirit that gripped oil traders as industry giants from Saudi Arabia to Goldman Sachs Group Inc. declared the supply glut over is rapidly ebbing away.

        Oil is poised for a drop of 20 percent since early June, meeting the definition of a bear market. While excess crude production is abating, inventories around the world are brimming, especially for gasoline, and a revival in U.S. drilling threatens to swell supplies further. As the output disruptions that cleared some of the surplus earlier this year begin to be resolved, crude could again slump toward $30 a barrel, Morgan Stanley predicts.

        The tables are turning on the bulls, who were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. Its probably going to take a little longer than they expected.

        Oil almost doubled in New York between February and June as big names from Goldman and the International Energy Agency to new Saudi Energy Minister Khalid Al-Falih said declining U.S. oil production and disruptions from Nigeria to Canada were finally ending years of oversupply. Prices are set for their biggest monthly loss in a year amid a growing recognition the surplus will take time to clear.

        For a story on challenges the new OPEC chief may face, click here.

        Theres lots of crude and refined products around, said David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. Demand growth has faltered a bit.

        The stockpiles of crude and refined oil that built up in industrialized nations during the years of oversupply remain formidable, standing at a record of more than 3 billion barrels, according to the Paris-based IEA. Traders struggling to sell cargoes are hoarding the most barrels on board tankers at sea since the end of the 2008-2009 financial crisis, the agency estimates.

        In some countries the glut seems to be getting bigger, with weekly U.S. government data on Wednesday showing a surprise inventory increase in the worlds biggest oil consumer at at time when summer driving demand should deplete stockpiles.

        The latest challenge for the market is a shift in the surplus from crude to products, Jeff Currie, head of commodities research at Goldman Sachs in New York, said in a Bloomberg Television interview Wednesday. Refiners churned out gasoline earlier in the year to take advantage of cheap crude, and stockpiles of the motor fuel are now at the highest for the time of year in at least 20 years, EIA data show.

        The next move lower could come as crude production ramps back up, said Adam Longson, an analyst at Morgan Stanley in New York. Canadian oil-sands producers have restored what was halted in May when wildfires menaced more than 1 million barrels of daily output. Nigeria has partially recovered after militant attacks curbed production to a three-decade low, according to the IEA.

        In the U.S., production declines have leveled off over the past three weeks, EIA data shows. The weekly count of active oil rigs published every Friday by Baker Hughes Inc. has recorded its longest run of increases since August.

        Hidden Surplus

        Did the glut disappear in the first place? asked Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. It was masked for a while by the shortfalls in Nigeria and Canada, but it did not disappear.

        Still, banks from Citigroup Inc. to Barclays Plc and Societe Generale SA are confident the overall re-balancing of the market remains on track, despite the current price retreat, and that markets will recover by the end of year. The latest sell-off reflects the strength of the dollar, which curbs investors appetite for commodities, rather than any worsening of supply-demand fundamentals, according to Goldman Sachs.

        I would call it a bump on the road towards a looming rebalancing, said Miswin Mahesh, an analyst at Barclays in London. The supply side is adjusting sharply and we will see it slow down a lot faster than demand from the fourth quarter onwards. The low price is creating a one-two punch moment for the supply side, taking off both current and future supplies.

        The recovery will take prices up to $50 a barrel by the end of the year, according to Barclays and Commerzbank. In the meantime however, sentiment has soured so much that further losses to $40 are inevitable, Commerzbanks Weinberg said. West Texas Intermediate crude futures lost as much as 1.4 percent to $40.57 a barrel on Friday.

        The oversupply will diminish, Weinberg said. But the market is deaf in one ear right now. Sentiment was too pessimistic at the beginning of the year, extremely bullish in June, and now back again to pessimism.

        Read more: http://www.bloomberg.com/news/articles/2016-07-28/oil-glut-proves-harder-to-kill-than-saudis-to-goldman-predicted