Oils traders have been watching OPEC and OPEC+ meetings closely – even though their attempt to stifle oil production had been derailed, both by some of its own members and by the U.S. ramping up their own production to offset the slowing of production. Their intent was to slow production to diminish global crude reserves – bringing the price of oil up.
Although recently we have seen oil inch up and fall slightly today, Tuesday – Brent was trading at $63.34 and US light crude was trading at $57.61 – it seems that the OPEC+ 1.8 m barrels/day cut didn’t seem to as effective as they hoped. At this point and taking into consideration the impotence of the production cut agreement amongst the countries of the cartel, some market watchers are wonder whether the agreement will even be extended.
Analysts from Goldman Sachs are backing up this estimation, saying the outcome of the upcoming meetings are uncertain. The biggest factor some people are noting is the negative impact the cuts had on the Russian economy in October – Russia being the world’s biggest crude producer. Ironically the recent oil price peak, with its high on Friday at $59.05, wasn’t a result of the OPEC cuts but the temporary shut down of the main crude pipeline between Canada and the US named Keystone.
Even if everything goes OPEC’s way and even Russia agrees to an extension, the US and its non-cartel counterparts will inevitably ramp-up output, like they did previously, much like in September when oil prices were stuck between the $45 – $50/barrel mark. This is largely attributed to the increase in Shale extracting, which reached peak production as OPEC’s efforts to cut production fell flat.
There is also side-ways effects, although superficially higher oil prices should benefit producers, prices that are too high tend to stifle demand as people seek alternatives to fossil fuels. For example electric cars have lost a big part of their market share due to the recent drop in oil prices. Another layer to this complex hydrocarbon cake, is the fact that higher prices instigate increased production and the danger for another implosion of the price.
It is a very good estimation at this point that the next OPEC meeting will be a negotiation between Russia and the ad-hoc head of OPEC Saudi Arabia in the hopes that they can reach a compromise, which ultimately sees Moscow back the agreement. Some estimate that even without the backing of Russia, OPEC will still go forward with the cuts extending them well into 2018. With Russia and most of the America’s producing at normal capacity or even more – these cuts are likely to be ineffectual.
It seems at this point that Saudi is more preoccupied with Russia than it is about its frictions with Iran. Ironically it seems that markets have the same mentality even though a conflict between these two countries could potential cause an increase in oil prices (due to a drop in production or the damage caused by arm conflict to oil facilities).
A lot of retail level traders use technical analysis as part of their trading strategies. Although that can be valuable data, market volatility – caused by economic calendar news – doesn’t necessarily care about head and shoulders or double top patterns. This is why if you are interested in trading you should definitely keep an eye on the economic calendar. Not all economic calendar events are created equally though. Here are 7 reoccurring events you should be aware of.
The 7 Economic Events you Should Definitely Follow
The US Non-Farm Payrolls is delivered at 8.15 EST on the first Friday of each month, holidays excluding – or when they are transferred from the preceding weekend. The NFP has the potential to create volatility globally, but it weighs more heavily on USD and JPY, especially if the data comes in under market expectations.
#2 Interest Rate Decisions
Here’s a little ECON 101 – interest rates are a great barometer for the health of an economy. That’s why markets always perk up their ears when a policy influencer mentions it – no interest rate decision usually pushes currencies down and interest rate hikes usually see currencies go up. Not all currencies mind you, just the ones that the policy affects.
#3 Chinese Manufacturing Data
If you prefer Asian markets then you will definitely need to watch Chinese Manufacturing Data closely – being the world’s biggest economy – even if you don’t trade the Asian session it might a good idea to be aware of it. China is one of the biggest exporters of the world and the world’s third largest importer. So it come as no surprise that any news related to China’s economy are going to move markets.
#4 Inflation Data
Much like interest rates consumer price and producer indices show the health of the economy – and more ECON 101 its simple supply and demand – in a healthy economy people buy consumer items and likewise production of said consumer items (and services) increases also. If these indices coming in under expectation, markets tend to scramble selling off the currency effected.
#5 Unemployment Rate Reports
This also is a good predictor of economic growth, stability and health. The better the economy, the more jobs there are and fewer the people that remain unemployed.
This mean Gross Domestic Production – this is a country’s economic Rosetta stone. Maybe that’s a bit of laboured metaphor – but what the GDP is, is the sum of all things produced in a country during the reporting period.
#7 Rate Announcements
Heads of central banks usually make statements leading up and following interest rate meetings. Markets follow these statements or speeches closely – as sometimes the Heads of these central banks reveal their intention – to either hike or keep rates during these statements.
Finally, there are few events that aren’t considered as significant as the ones mentioned above, but still provide valuable information:
Business Confidence reports
Core Retail Sales
Surveys such as the ZEW and manufactures’ reports.
Investing can be a challenging endeavor. It’s not even people’s fault that have this perception, as many educational systems completely ignore finance even on the personal level. Some lucky few had the privilege of learning about the value of saving and investing from home. Of those few, even fewer had parents that were portfolio managers that could actually give them any valuable insight into personal investment. But who needs parents or school to teach you things when you have the internet.
This article will give you a few tips that most beginner investors should know and hopefully put you on the path of reaching personal financial goals.
Start saving as soon as you can. Legendary hedge fund manager Warren Buffet started his personal wealth portfolio right after high school and filed his first income tax return at 14. Usually the longer you are investing for, the better the returns. You don’t need to have access to institutional level investment to save either, millionaire Mark Cuban says you should buy a years’ worth of toothpaste when its 50% off. Just one tube won’t make much of a difference, but over a year’s supply, it will inevitably give you some budget breathing room. That idea can be transferred further into savings and investment, try to get the best conditions possible no matter which way you choose to save or invest.
If you’ve been perusing the investment forums, blogs and websites you might have heard about a little thing called traders psychology. If you weren’t distracted by a sponsored ad about “30 of the most expensive cat breeds” then you might have noticed a common thread running through most articles dealing with trader’s psychology – discipline. Even if you prefer safer investments or even out-and-out savings, self-control is extremely important. You might have heard of the “marshmallow experiment”. This will make sense in a second – basically in the 1960s a Stanford professor sat children in front of a plate with a single marshmallow. They were told they could eat that marshmallow immediately or wait for a little and receive two. Then the person administering the test, left the room. The researchers then followed the children and found those that could delay gratification (and receive the second marshmallow) actually did better later in life. Delaying gratification, is an extremely valuable asset (no pun intended) for people investing and saving. You might really want that new bigger TV but you would have much more fun with a boat – which will have to save longer to purchase. Maybe that wasn’t an amazing example but you get what I’m trying to say.
Have a Plan
What are your investment goals? By when you would like to reach that goal? Increasing you net worth is a deliberate and strategic process – here is an example: government bonds are low yield but stable, more aggressive investment types can have higher yield, but are also much riskier. Not having a plan or not adhering to it can cause you to hold on to a damaging investment in the hopes that will recover, even though your strategy might have defined selling of the instrument at a specific price level.
What are your investment options?
The most straightforward approach to investing, is putting aside a percentage of your income that isn’t necessary for everyday living costs, usually in a savings account. This traditionalist stance is safe but as an investment model might not create significant interest, those assets could create more income using a different type of investment. There is a myriad of investment options from online Forex trading to the aforementioned government bonds. Of course, the best tactic is to speak with a licensed and professional financial advisor.
Diversify its important
Don’t put all of your eggs in one basket – because if you stumble and drop them, most of them will break. This is something that even professional traders use, investing in more aggressive instruments while counterbalancing their risk with safer investments. Many financial advisors recommend having a mix of investment types including stock, bonds and other types of asset classes depending on your investment goals. The ratio of investment instruments you use depends on how conservative and risk averse you are or aggressive with higher risk appetite.
Knowledge is a Risk management tool
Investment accounts are complex financial services involving rising asset valuations, regular contributions and compound interest. To add to these complexities frequently the instruments these accounts invest in are complex derivatives such as options, futures, forwards and others. Not only should you be familiar with these products but you should also be aware of the markets you are invested in. Becoming an investor requires you to study and follow the markets and learning as much as you can.
Know your tax code
Being aware of your country’s tax code will help you to avoid paying unnecessary taxes on your capital gains. Most tax codes allow for certain tax leniencies and deductions – like 401Ks in the United States – where the income set aside in the retirement fund isn’t taxed but is taxed when it is withdrawn during retirement. Another reason you should know your country’s tax code? To avoid unnecessary, lengthy audits and expensive fines.
The is a reason why patience is a virtue. Because the shorter the timeframe you seek to reach your investment goals, the more aggressive your strategy will have to be. This means your exposure to the market and of course risk will have to be exponentially higher. Although everybody thinks Warren Buffet was born wealthy, but as I mentioned before the truth is that Buffet started his investment career when he was 14, by buying land which he leased to a tenant farmer. A long-term strategy will give you an end point to strive to, hopefully mitigating the averse psychological effects of losing. Most people are life-long investors, which is of course the longest of investment strategies.