US Federal Reserve Says Outlook “Highly Uncertain”

Oil

We focus on Brent as the global benchmark.

Prices bounced to $43.14/bbl during the week as High-Frequency Traders bid up prices on news of drilling rig shutdowns related to Hurricane Sally, which took over a quarter of US offshore gulf crude oil offline.

The market was also digesting news from the online OPEC meeting. Saudi Arabia was clearly extremely annoyed at other OPEC members exceeding their quotas. Particular fury was aimed at the normally ultra-loyal UAE – which according to the IEA has been producing an extra 520kbd (20%.

Saudi’s oil minister went on to threaten that “those who gamble on the oil price will be hurt like hell”. But in reality, it is the demand which remains the real problem. OPEC itself reduced its 2020 forecast for oil demand to 90.2 mbd (down 400kbd in just one month). And with prices low, cash-strapped producers will always be tempted to over-produce.


S&P 500

We focus on the US S&P 500 Index as the world’s major stock market index.

The market slipped again last week, closing at 3319; whilst the tech-heavy Nasdaq index is now down 12% from its peak. Apple (AAPL) is down 23% from its high, Netflix (NFLX) down 18%, Nvidia (NVDA) 17%, Facebook (FB) 17%, Amazon (AMZN) down 17%, Google (GOOG) 16%, Microsoft (MSFT) down 14%.

The week’s “highlight” was the Snowflake IPO (SNOW), which perfectly captured the bubble mood on Wall Street. It is, of course, losing money – $171m in the 6 months to July, on revenue of $242m. And it has been loss-making since it was founded in 2012. It also operates in the highly competitive field of managing data on the cloud, and so competes with deep-pocketed rivals including Microsoft and Amazon,

But in today’s bubble economy, details like this don’t matter. Wednesday’s buying frenzy on its debut took it to peak valuation of over $70bn. That’s a price/sales ratio of nearly 150, annualizing the 6-month data. Nothing like this has been seen since the peaks of the 1999 dotcom era, after which the Nasdaq Index fell 78%.

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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this ...

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