MBCC TH 10th January'23 - "China reopening is a lot more complicated than most think, we look at the bottom of the Oil barrel and tell you what is mis-priced!"

The market is range bound as it tries to find the “new” direction into 2023. Bulls are bumped up on the China reopening trade and Fed pivoting sooner than later. Bears are still focusing on the 2023 earnings yet to fall to price in the recession. But going through all the strategy notes and numbers, even if a recession is known and priced in to an extent, only a mild one is expected. There are definitely no signs of a harsher more severe one in any ones numbers. Now, it is hard to say how bad the recession will be, this is why we monitor our cross asset models to look at how the landscape is developing day by day, as it depends on a host of factors. It is not a one way bet, and what we do is look at what is PRICED in vs. what is NOT, to see the extent the of risk/reward in any of the themes we pick up on.

After all trading is all about upside vs. downside.

Today we also discuss the China reopening in the Oil section and what it really means for physical Oil demand. Once again, the street is too naive about assuming an opening is a one way bet, far from it! There is a lot to play for beneath the barrel, and therein lies the true arbitrage! Most generalists just look at WTI or Brent, but that is far from what really drives the Oil market. Or generically quote “Ok so Oil is at $80, China was closed, so now it is open, Oil goes to $140!” Really? Wow. (these are also the same people who have been pushing the long since $135 to be fair).

We analyse each part of the barrel based on our demand looking indicators and tell you how to trade this and what is in store for Equities. Of course Equity analysts are always behind the curve as they themselves do not drive forecasts based on pure physical market analysis, yet they take their GDP numbers and assuming flat demand and call for tight markets, period! Ridiculous. We saw what these same analysts had to endure back in 2H’22 when Oil prices fell 40%+.

We take an in-depth look at Gas to Oil switching - another very big point discussed last year. We look at Coal markets, what is China doing and what is priced in?

This year the market will not be about MACRO, it will be a bit about that but a hell of a lot about MICRO and picking the right stocks and sectors, doing some real work and analysis!

The problem is people only know how to make money in QE!