Where are we at in this downturn?

[Hektor]

13 minutes ago, rogermunibond said:

In this environment there are much better companies to buy than OXY.  Buffett was buying OXY when the opportunity set was very limited.

That's a good perspective @rogermunibond

[Hsmpanl]

9 minutes ago, Hektor said:

Interesting. Is $40 not the average breakeven across all OXY assets?

That sounds like a Permian specific number to me, and the breakeven would be for the capital required to drill and complete. Our development projects in the Eagle Ford breakeven (NPV0) ~$56/bbl, and previous Permian assets I've worked that was closer to $35/bbl.

 

Oxy existing production breakevens should be more like $10/bbl if you exclude corporate and overhead expenses. They'd be making significant cuts to staff, activity, and incur large production declines if prices dropped to $40, and FCF would likely be negative.

Edited April 9, 2025 by Hsmpanl

[Hektor]

12 minutes ago, Hsmpanl said:

That sounds like a Permian specific number to me, and the breakeven would be for the capital required to drill and complete. Our development projects in the Eagle Ford breakeven (NPV0) ~$56/bbl, and previous Permian assets I've worked that was closer to $35/bbl.

 

Oxy existing production breakevens should be more like $10/bbl if you exclude corporate and overhead expenses. They'd be making significant cuts to staff, activity, and incur large production declines if prices dropped to $40, and FCF would likely be negative.

Thanks @Hsmpanl

[LC]

4 hours ago, Spekulatius said:

I see right now that bonds are screaming higher. Falling equities and sharply higher treasuries is not something that one sees too often. I don’t think it’s a good thing.

 

Isn't this what we expect? Higher treasury yields imply lower equity prices.

[gfp]

2 minutes ago, LC said:

 

Isn't this what we expect? Higher treasury yields imply lower equity prices.

 

No not really.  You might think that we would demand higher earnings yields when risk free rates rise but in practice lower treasury yields mean weak economy and higher treasury yields mean strong economy and stocks trade opposite to bonds most days.  Risk parity and all that

[brobro777]

Vertical baby

 

haha yes

 

[Red Lion]

1 hour ago, LC said:

 

Isn't this what we expect? Higher treasury yields imply lower equity prices.

 

This morning yes, but this afternoon no. 10 year yield still up 15 basis points on the day and S&P500 is up 8.5%. I bet trump is trading weekly options. 

[mattee2264]

Well I guess we now know where the Trump put is. The 30 year US Treasury rising above 5%. 

 

I don't think this is over though. 10% tariffs are still high enough to do some damage and then there is the uncertainty over what happens after 90 days and whether the trade war with China can be resolved amicably. 

 

 

 

 

 

[Red Lion]

1 hour ago, mattee2264 said:

Well I guess we now know where the Trump put is. The 30 year US Treasury rising above 5%. 

 

I don't think this is over though. 10% tariffs are still high enough to do some damage and then there is the uncertainty over what happens after 90 days and whether the trade war with China can be resolved amicably. 

 

 

 

 

 

 

Devil's advocate:

 

1) What if this was the plan all along to push china into the corner?

2) What if no one else wants to do retaliatory tariffs and lets our 10% tariff stand just because they know Trump is loco? 

[gfp]

I will just say that today's "face ripper rally" - as my lovely wife phrased it this afternoon - should not make people more bullish.  I'm back to 25% cash on average at the close and it feels good

[villainx]

8 hours ago, Red Lion said:

 

Devil's advocate:

 

1) What if this was the plan all along to push china into the corner?

2) What if no one else wants to do retaliatory tariffs and lets our 10% tariff stand just because they know Trump is loco? 

 

Art of the deal!

[Sweet]

2 hours ago, gfp said:

I will just say that today's "face ripper rally" - as my lovely wife phrased it this afternoon - should not make people more bullish.  I'm back to 25% cash on average at the close and it feels good

Yeh, it’s a time for loose convictions on the macro side. We aren’t at stupid silly valuations for anything even after the sell off.  I think the immediate bearish threat has receded and I’m guess those higher tariffs won’t come back.  However, stocks were slipping before the tariff threat and the economic data looked to be souring so we could be in for a recession.  But Nobody actually knows anything though.  Macro stuff is just too hard.

[adventurer]

I don`t know where we are from hereon. I only know that the Buffett indicator is still too high, that I am confident with my one position in FFH, that I have 25% cash now, that volatility is crazy high and that I can only wait. Any criticism on my view would be appreciated.

[mattee2264]

1) Even if the trade war does just end up being with China that still is going to be disruptive. USA imports over 10% of its goods from China. US MNCs also get a lot of business from China. Trade substitution doesn't happen overnight.  Trade war 1.0 in his first term was also mostly with China but still caused a global slowdown. 

 

2) It is one thing not to retaliate and another to give in. Trump has said 10% for 90 days for countries that didn't retaliate and agree to negotiate. For the 10% tariff rate to stick countries will presumably have to give Trump what he wants in negotiations and his demands are unlikely to be reasonable. He's also weakened his hand by showing that he will cave when markets turn against him. 

 

10% tariffs that stick and some degree of de-escalation with China is probably the best that can be hoped for. At least it gives a degree of certainty. But it still will have a negative impact on inflation and economic growth although a slowdown rather than a recession is far more likely now. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Blake Hampton]

I strongly believe we're at the very beginning:

Trump’s incoherent trade policy will do lasting damage - The Economist

America’s financial system came close to the brink - The Economist

Bond-market convulsions look extremely dangerous - The Economist

 

I'm gonna take another break from the board for a bit.

[Spekulatius]

There are still 25% tariffs for autos, steel, Aluminum in addition to 10% blanket tariffs in addition to the absurd China tariffs which will cause a trade freeze with them. The trade weighted tariff rate for the US went from 3-4% to ~15%. Thats still a huge shock to the system.

[Paarslaars]

Why take a break from here? The push-back and intellectual sparring are the best thing a young mind can be subjected to for personal growth.  

[Castanza]

7 hours ago, gfp said:

I will just say that today's "face ripper rally" - as my lovely wife phrased it this afternoon - should not make people more bullish.  I'm back to 25% cash on average at the close and it feels good

Yup, play the game

[Paarslaars]

40 minutes ago, Spekulatius said:

There are still 25% tariffs for autos, steel, Aluminum in addition to 10% blanket tariffs in addition to the absurd China tariffs which will cause a trade freeze with them. The trade weighted tariff rate for the US went from 3-4% to ~15%. Thats still a huge shock to the system.

 

Agreed, markets were euphoric yesterday but I expect realism to seep in and gradually bring them back down.

Edited April 10, 2025 by Paarslaars
spelling

[Charlie]

I remember in 2000 John Templeton said of the market: "The stock market is broken".

I think this is the case here, too.

Nobody trusts the sucker anymore. 

[Spekulatius]

4 hours ago, Castanza said:

Yup, play the game

Yes, I am also buying the dip and selling the rip which feels like it might be a good idea for the time being.

[Dalal.Holdings]

When “buy the dip” dies and “sell the rip” lives, that’s how bear markets are born.

 

A lot of retail folks have been buying the dip because it has worked so well for so long, but they might be in for painful lessons.

[Charlie]

When history rhymes there is a possiblity of a big crash (every 25 years) coming:

 

1974

2000

OK, there was 2008/2009

2025

 

The reasoning why every 25 years make sense is that there is a

new generation of (naive) investors, who have to learn some things

the hard way. 

[WayWardCloud]

I bought the dip quite hard on Friday (went from 85% stocks 15% bonds to 120% stocks 0% bonds) and my strategy is simply to wait until the news du jour is Trump's economic policies. Tax cuts for companies and freebies to the 0.1%. A quick look at Trump's entourage will tell you the oligarchy is in full power. They're not going to work against their own interest. Keep it simple guys.

[mattee2264]

It makes sense to me that the downturn hit a wall pretty quickly. 

 

It is pretty typical for markets to panic when there is a shock. On this occasion it was a policy shock. Markets did their usual thing and threw a tantrum and eventually Trump pivoted. They probably figure there will be a similar outcome with the China trade war. Many of the worst case scenarios have been taken off the table because it is clear that there are market constraints which are going to limit how far Trump will push his agenda. However the risk is there will be knock on effects from all the uncertainty and even the diluted 10% universal tariffs (with China probably getting 30-40% when the dust settles) is still enough to cause a global slowdown and once the economy slows it can develop momentum as bankruptcies and layoffs and spending cuts cause more damage. 

 

Inflation has eased a little (probably reflecting we are already in a slowdown) but there still isn't the same room to manoeuvre as there was in previous years. When you are running multi-trillion fiscal deficits (that will worsen in a downturn as automatic stabilizers kick in) there isn't much room for additional stimulus. While I imagine Trump will find a way to get rid of Powell and get interest rates down and resume QE it isn't a panacea.