Follow up on my previous post regarding employment.
Mr Denninger was just on Stocks & Jocks and commented on the adjustment to the establishment survey number and admitted that he does not have historical data on this as he does with the household survey number - however he did mention that is a rather large adjustment
Not to be confused with typical Christmas firings (household survey etc)
The 'derivative exposure' numbers can be very misleading as they are all notional and not in anyway netted. Bank A could buy a 1kkb 2017 oil swap from Bank B at $35 and then tomorrow sell them back the same product at $35.10. Bank B doesn't want to give Bank A the $100k profit they made because they don't have to until the swaps settle in 2017. Hence both Bank A and Bank B now have an additional $70M derivative exposure even though they have no position.
Another way to think about this. Imagine you day trade say 50 round turns/100 sides day of CL. Even at $30 thats a $3M notional. Do that 250 days a year and thats a $750M notional. Now tell your next door neighbor that you trade $0.75 Billion of crude a year and see how he reacts. Obviously not a great comparison as futures are netted but I think it illustrates how these numbers can suddenly look so huge. I picked CL in this example as this is the CL thread, but while the notional on CL is currently around $30k, the notional of an ES contract is 3 times larger at $92k so an ES trader trading 100 sides a day is trading over $2B in equity derivatives a year!
Hmmm. DB used to have a very large commodity desk. But then so did Goldman, Morgan, Barclays, UBS, JP and several other of the major banks. DB like most of the banks have significantly reduced their commodity trading exposure. Even if they are the largest commodity trading bank, that's small fry compared to what it was 5 years ago. Of course, as described above, their notional derivative positions is probably still enormous, even if their net position isn't.
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Oh yes I don't think that's a theory, I think that's reality. As long as variable cost > market price, keep pumping.
It doesn't really matter what your fixed costs are/were (cost of land, cost to drill well, interest on loans etc) you have to pay those costs whether you keep the well pumping or not. So as long as what you are getting more for the oil than what it costs you to pump that oil (labor, rig lease) you keep it flowing, and just lose less money than you would do if you stopped flowing.
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