The DC Today - Thursday, January 12, 2023
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 12 January 2023
⏱️ 12 minutes
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Summary
Dow: +269 points (+0.81%) S&P: +1.28% Nasdaq: +1.76% 10-Year Treasury Yield: 3.54% (-7.6 basis points) Top-performing sector: Real Estate (+3.60%) Bottom-performing sector: Consumer Staples (+0.06%) WTI Crude Oil: $77.71/barrel (+3.45%)
ASK DAVID “The US government has stated that it will purchase crude oil to replenish the strategic reserve once the price hits $70. In effect, this seems to indicate that the government will purchase millions of barrels at $70.
Does this function as a price floor? And, if so, what impact does a government-created price floor have on markets?”
~ Keith
So just by way of clarification, they have indicated they want that to be the rough price level at which they will transact, but their rough and very ambiguous guidance on the subject would indicate the intent of more a floor than a ceiling and yet, if the price does not go (or stay) there, it may not be a price at which much transacts. The government cannot make the market cooperate. But to the extent the market expects that level to be a rough “floor,” I suppose one could assume in their economic calculation that some of the left tail risks of various price collapses are less likely. The problem is that they can change their mind, and any number of events could happen (upside or downside) that alter the economics here. What market actors ultimately know is that there is a forced buyer in the marketplace, and supply calculations, profit expectations, and a number of numerical considerations around production can be performed with that intervening fact lingering. It does suggest a certain backstop in matters which provide a bit of an asymmetrical risk/reward (in the producers’ favor). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:13.3 | Well, hello and welcome to the Thursday, DC Today. We got here. It's been quite a long week, busy. And I think the CPI number was what |
| 0:23.3 | a lot of people in markets were waiting for. So we got here to this point. And let me just kind of |
| 0:29.3 | give you first, the market summary. And then I want to unpack the CPI, the consumer price index, |
| 0:37.0 | the inflation data, a little bit more for you. |
| 0:41.1 | So the market was up and yet I wasn't really wrong about how the market was going to respond immediately to the news that there would be short-term positioning issues. |
| 0:53.1 | And in reality, market went up. |
| 0:55.8 | And then it did come down, went negative. |
| 0:58.0 | And then again, an hour, almost two hours after the data came, then the market went back higher. |
| 1:07.3 | And so you just get this kind of clearing out of different hedges and speculative |
| 1:14.1 | trades and then you get a little chance to breathe. But indeed, this CPI number did not |
| 1:20.3 | underwhelm or disappoint. And it wasn't overwhelmingly lower, meaning inflation was not overwhelmingly |
| 1:27.2 | lower than had been expected, |
| 1:29.7 | but it was lower as expected. And that we'll talk about the details of in a moment. But the Dow was up |
| 1:38.8 | 217 points. You'll see in the chart of the day of the way the market moved today that it took that |
| 1:45.8 | V down and then V back up and then kind of stayed to the upside, you know, for the rest of the day. |
| 1:51.1 | There was some ups and downs, but really pretty steadily higher at that level. So I think it was by |
| 1:57.9 | 10, 15 a.m. Eastern that the market came back up and then from there all |
| 2:04.8 | the way to the close just kind of stayed right there around up 200 points. |
| 2:08.8 | The S&P was up 34 basis points on the day. |
| 2:12.6 | The NASDAQ was up 64 basis points, the same as the Dow. |
| 2:17.7 | And then just really massive bond market rally. |
... |
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