If China National Offshore Oil Corp., or CNOOC, wins the bidding war for Unocal, the El Segundo, Calif.-based oil company, does it follow that that the newly acquired energy will be diverted to China? Not necessarily. Oil is a fungible commodity, and so it’s consumed by the highest bidder, the New Yorker’s James Surowiecki argues. “In today’s world whether or not you own the means of oil production doesn’t affect your access to the stuff.”
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CHASING THE FOREIGN EDGE
Institutional investors are no strangers to international investing, but that doesn’t stop the big boys from rediscovering foreign equities every so often. Are we in the middle of one of those rediscovery moments now?
A NEW QUARTER & THE SAME OLD QUESTIONS
The old logic that one shouldn’t fight the Fed suffered yet another indignity yesterday. It was hard not to notice the divergence between the rise of the fed funds rate by 25 basis points to 3.25% and the decline in yield for the benchmark 10-year Treasury Note by roughly seven basis points to around 3.91%.
RESEARCH ROOM UPDATE
BP’s 2005 Statistical Review of World Energy was published in June. CS highlights a few of the ugly details in the Research Room.
INTEREST RATE RISK? WHAT INTEREST RATE RISK?
Interest rates are the “greatest risk” facing the stock market, according to a freshly minted survey of money managers. “The managers rate interest rates above geopolitical events, inflation worries and increasing energy costs as their major source of concern,” according to Frank Russell Company’s June 2005 Investment Manager Outlook. “But they believe higher rates will have a stronger impact on bonds, U.S. Treasuries and real-estate securities—on which they are uniformly bearish—than on stocks.”
DOES THE DOLLAR RALLY HAVE LEGS?
Few expected it, but the dollar rallied just the same. In the wake of the currency’s volte-face arises the question, Is this a dead-cat bounce?
BACK & FORTH, TO & FRO
The frontline in the debate over pricing bonds can be found in the analysis of two opinionated pundits. In the bulls’ camp is David Malpass, chief economist at Bear Stearns, who argues in an op-ed in today’s Wall Street Journal (subscription required) that the “U.S. expansion has been strong and steady despite the warnings of fragility, the repeated claims of a slowdown, and the fear of China (as intense as the Japan fears of the 1980s).” Taking the opposing view is Bill Gross, chief investment officer of Pimco, the giant bond shop in Newport Beach, Calif. “This recovery is different,” Gross writes in a newly published essay, “because it was spawned and subsequently nurtured on the back of asset appreciation alone.”
WE’RE ALL SWISS NOW
Forget the Fed. America’s saviour awaits in another Paris Air Show.
ALL THE WORLD’S A STAGE FOR OIL ACQUISITIONS
Treasury Secretary John Snow and others in Washington have been eager to boost American exports, but the proposed sale of the El Segundo, Calif.-based oil firm Unocal Corp. to China’s state-owned CNOOC Ltd. isn’t quite what they had in mind.
A DIP BELOW 4%
The bond market has its story and it’s sticking with it, namely, an economic slowdown is coming. That, at least, seems to be the message in yesterday’s dip below 4% for the yield on the 10-year Treasury Note. That’s the first slip below that mark since June 9.