Tag: #Top Trading Programs

Inflation – Perception versus Reality

Perception

From 1970 to 2020 personal Income, stocks, home prices, precious metals, GDP, Federal revenue per capita and per employed person all outperformed reported inflation.

1970-2020 average annual reported inflation 4.03%

Average annual growth in personal income 5.51%
Average increase in median home prices 5.25%
Average increase in the S&P 500 8.63%
Average increase in Gold 9.81%
Average increase in Federal revenue per capita 4.99%
Average increase in Federal revenue per employed person 4.53%
Average annual growth in GDP per capita 5.14%
Average annual growth in the GDP per employed person 4.70%

Personal income outperformed inflation by 100.72%

5.51% 1970-2020, average annual growth in personal income
1.48% average annual growth above reported inflation
$29,714 what personal income would be in 2020 if pegged to inflation
$59,642 actual personal income in 2020
$29,928 overall growth in annual personal income above inflation

Median home prices outperformed inflation by 74.88%

5.25% 1970-2020 average annual appreciation
1.22% average appreciation above inflation
$192,671 what median home prices would be in 2020 if pegged to inflation

$336,950 actual median home price in 2020
$144,279 overall appreciation in median home prices above inflation

The S&P 500 outperformed inflation by 432.48%

8.63% 1970-2020 average annual appreciation
4.83% average appreciation above inflation
705.40 what the S&P 500 would be in 2020 if pegged to inflation

3,756.10 actual price for the S&P in 2020
3,050.70 overall appreciation of the S&P 500 above inflation

Gold outperformed inflation by 462.54%

9.81% 1970-2020 average annual appreciation
5.78% average appreciation above inflation
$315 what the price of gold would be in 2020 if pegged to inflation

$1,772 actual price of gold in 2020
$1,457 overall appreciation of gold above inflation

Federal revenue per capita outperformed inflation by 44.13%

4.99% 1970-2020 average annual growth in Federal revenue per capita
0.96% average appreciation above inflation
$7,160 what Federal revenue would be per capita if pegged to inflation
$10,320 actual Federal revenue per capita in 2020
4.03% 1970-2021 average annual reported inflation

Federal revenue per employed person by 20.43%

4.53% 1970-2020 average annual growth in Federal revenue per employed person
0.50% average appreciation above inflation
$20,093 what Federal revenue would be per employed person if pegged to inflation
$24,197 actual Federal revenue per employed person in 2020

GDP per capita outperformed inflation by 67.16%

5.14% 1970-2020 average annual growth in GDP per capita
1.11% average growth above inflation
$38,551 what GDP per capita would be if pegged to inflation
$64,443 actual GDP per capita in 2020

GDP per employed person by 49.33%

4.70% 1970-2020average annual growth in GDP per employed person
0.67% average growth above inflation
$101,190 what GDP per employed person would be if pegged to inflation
$151,103 actual GDP per employed person in 2020

In 2021 the U.S. has a higher percentage of the U.S population working and paying taxes than 36 out of the last 52 years.

44.23% of U.S. population is employed in 2021
2.25% from its 52 year high of 46.79% set in 2000
2.16% higher than the 52 year average 42.07%
9.88% higher than the 52 year low of 34.35% set in 1971

Perception

With these glowing fundamentals you’d expect quality of life for U.S. citizens to be at or near an all time high, that the Federal Government would be running budget surpluses, paying down debt and working hard towards restoring their fiscal credibility and their AAA debt rating.

Reality

From 1970 to 2021 Federal debt increased by 28.16 trillion
Federal debt as a percent of GDP increased from 35.49% to 125.77%
Federal debt per capita, from $1,879 to $86,025
Federal debt per employed person from $5,365 to $195,836
Federal Spending per employed person, from $2,929 to $53,210
9.1 trillion dollars in Federal Reserve bailouts, 8.2 trillion since 2008
2 debt downgrades caused by record deficit spending and the creation of trillions to fund it.
Borrowing out all monies paid into Social Security by issuing non marketable debt which has helped expedite its projected insolvency date to as early as 2028.
Borrowing the monies paid into Military and Civilian Employee Trusts by issuing non marketable debt which could jeopardize fair retirement income for beneficiaries.
Mismanaging Medicare pushing up it’s projected insolvency date to 2026
All in, Government had piled on 154.473 trillion in unfunded liabilities

Federal spending per capita from 1970 to 2021 outpaced inflation by 228.46%

6.88% average annual growth in Federal spending per capita
2.85% average growth above inflation
$23,406 actual Federal spending per capita in 2020
$7,242 what per capita Federal spending would be in 2020 if pegged to inflation

Federal spending per employed person outpaced inflation by 158.58%

6.49% 1970-2020 average annual growth in Federal spending per employed person
2.46% average growth above inflation
$53,547 actual Federal spending per capita in 2020
$20,705 what per employed person Federal spending would be in 2020 if pegged to inflation

Average annual Federal spending above reported inflation.

Per Capita
1970-2007 1.77%
2008-2019 1.87%
2008-2020 6.40%
1970-2020 2.95%

Per employed person
1970-2007 1.04%
2008-2019 1.89%
2008-2020 7.25%
1970-2020 2.62%

In 2020-2021 Federal spending per employed person is equivalent to 87.09% of median personal income.

Increases in Debt to GDP from 1900 through 2021

1900 to 2006, from 10.29% to 35.49%
1970 to 2007, from 35.49% to 61.93%
2008 to 2021 from, 61.93% to 125.77%
1939, 43.30% (end of the Great Depression)
1946, 119.12% (end of World War 2)
High, 2020, 129.19%
1900-1970 Average, 38.97%
1970-2007 Average, 42.17%
2008-2021 Average, 100.53%
Low, 1907 7.19%

Sources & Data

Increases in Federal debt per capita

1970-2021 actual increase in Federal debt per capita, $1,879 to $86,025, +4,478.23%
1970-2021 if pegged to reported inflation, $1,879 to $13,206, +602.63%
2008-2021 actual per capita increase in Federal debt, $29,998 to $86,025, +186.77%
2008-2021 if pegged to reported inflation $10,036 to $13,206, +31.58%
2020-2021 actual per capita increase in Federal debt, from $69,392 to $86,025, +23.97%
2020-2021 if pegged to reported inflation $12,374 to $13,206, +6.72%

Increases in Federal debt per employed person

1970-2021 actual increase per employed person $5,365 to $195,836, +3,691.59%
1970-2021 if pegged to reported inflation $5,365 to $37,693, +602.63%
2008-2021 actual increase per employed person, $64,871 to $195,836, +201.89%
2008-2021 if pegged to reported inflation, $28,645 to $37,693, +31.58%
2020-2021 actual increase per employed person. $150,228 to $195,836, +30.36%
2020-2021 if pegged to reported inflation. $35,420 to $37,693, +6.41%

U.S. debt compared to other countries

1970-2020, 28.17 trillion in new Federal debt, this is more than the total debt of the United Kingdom, Italy, France, Germany, Australia, Canada, Mexico, Russia, China, Taiwan and India combined, total population of these countries 3.468 billion, U.S. population 332 million.

Since 2008, 19.60 trillion in new Federal debt, more than the total debt of the United Kingdom, Canada, Australia, Switzerland, Greece, Turkey, Taiwan, China, Russia, India, Argentina, Mexico and Nigeria combined, total population of these countries 3.587 billion.

Fed Bailouts since 2008 8.26 trillion, more than the total debt of China, population 1.442 billion.

16 months, 5.88 trillion in new Federal debt, 304 billion more than the combined total debt of the United Kingdom and Canada.

Impact of record deficit spending and the creation of money to fund it

2 Federal debt downgrades, in 2021 the United States has the worst debt rating in history, 11 countries are now rated higher.

Country/Region	Rating	Outlook	Date
Canada	AAA	Stable	2002-07-29
Denmark	AAA	Stable	2001-02-27
Germany	AAA	Stable	2012-01-13
Liechtenstein	AAA	Stable	2016-02-26
Luxembourg	AAA	Stable	2013-01-14
Netherlands	AAA	Stable	2015-11-20
Norway	AAA	Stable	1990-11-08
Singapore	AAA	Stable	1995-03-06
Sweden	AAA	Stable	2004-02-16
Switzerland	AAA	Stable	1989-06-26
Australia	AAA	Stable	2020-10-20
Austria	AA+	Stable	2013-01-29
Finland	AA+	Stable	2016-09-16
Hong Kong	AA+	Stable	2017-09-22
United States	AA+	Stable	2013-06-10

Debt to GDP by country

Federal Reserve bailouts

1913-2007, 94 years
Formation of the Federal Reserve 1913
Total Federal Reserve bailouts 890.66 billion

2008-2019, 11 years
Total new debt Federal 13.719 trillion
Total money created by the Federal Reserve 3.275 trillion
Federal Reserve profits forfeited to the U.S. Treasury 892 billion
Total Federal Reserve bailouts, 4.167 trillion

2020-2021, last 16 months
Total new federal debt 5.881 trillion
Total money created by the Federal Reserve 4.036 trillion
Federal Reserve profits forfeited to the U.S. Treasury 144 billion
Total Federal Reserve bailouts, 4.180 trillion

In addition to the bailouts from 1998 to 2020 the Federal Reserve forfeited 1.242 trillion in operating profits to the U.S. Treasury, 142.49 billion more than total Federal debt in 1982.

Since 2008 the U.S. has cranked up 19.3 trillion in in new Federal debt and required the Federal Reserve to create over 8 trillion with keypunch entries for bailouts in the real world this would be inflationary

In the world of government inflation magically disappeared until May of this year

1970 to 2007 average Treasury rate 8.70% paying 3.99% more than reported inflation
2008 to 2020 average Treasury rate 2.67% paying 0.94% more than reported inflation
2021 average Treasury rate 2.01% paying 3.39% less than reported inflation
Reported inflation over the last 12 months 5.40%
1970 through 2021 average annual inflation 4.03%

What the BLS tells us a 1939, 1946 and 1980 dollar is worth today.

In 1980 total Federal was 863.45 billion closing in on 1.00 trillion dollars, citizens panicked, gold rallied to $850 an ounce and interest rates spiked above of 15%.

The BLS translates 863.45 billion in 1980 into 3.015 trillion in 2021 dollars, 2.865 trillion less than new Federal debt in the last 16 months

Cost of the New Deal 1933-1939

Total cost of the New Deal from 1933 to 1939, 41.70 billion (1939 dollars)
The BLS translates this into 809.27 billion in 2021 dollars .

Total cost of the New Deal in gold 1.226 million ounces
Cost of the New Deal in 2021 if pegged to gold 2.207 trillion dollars

What the New Deal did for 809.27 billion BLS 2021 dollars

- Job training for 8.5 million unskilled men to learn a new professions as they carried out public works infrastructure projects.
- Built or modernized more than 55,000 civilian and military buildings.
- Built 32 naval vessels, many played key roles during World War 2.
- Built 4,026 new schools, the majority are still open today.
- Built 130 new hospitals, including Fitzsimons , Allegheny General & Jersey City
- 29,000 new bridges & tunnels including Lincoln,Throgs Neck and Golden Gate.
- Scores of Dams including Hover & Shasta, the majority still produce power today
- Built or modernized over 180,000 miles of highways including the Los Angeles Freeway, the Overseas Highway(107 miles) connecting Key West to the mainland
- Built or modernized more than 150 airports including La Guardia and Midway.
- Built or modernized nearly 9,000 miles of storm drains and sewer lines.

New Deal Programs provided more than Infrastructure.

- The laborers of the New Deal programs worked in schools serving more than 900 million hot lunches to hungry children during the depression.
- Operated 1,500 nurseries enabling childcare so parents could work.
- Funded over 225,000 concerts and thousands of plays.
- New Deal cultural programs produced more than half a million works of art including Jackson Pollock’s 17A which sold for 200 million in 2016.
- The New Deal Writers’ program featured works from soon-to-be famous Authors like John Steinbeck, Steinbeck went on to win the Pulitzer Prize in 1940 for his novel The Grapes of Wrath.

Either President Roosevelt really knew how to stretch a buck in the 1930’s or BLS.GOV inflation is fictional.

Fiscal cost of World War 2

Total U.S. fiscal cost 291.18 billion in 1946 dollars.
The BLS.GOV translates this into 4.347 trillion in 2021 dollars

4.347 trillion is 59.59% of what the Federal Government spent in 2020,
97.35% of what the Federal Government spent in 2019.

The U.S.’s fiscal cost of World War 2 in gold, 131.662 million ounces
Cost of the WW 2 if pegged to gold 15.088 trillion 2021 dollars

Spending and new debt during last “crisis” and “recovery”, 2008-2019

47.689 trillion total Federal Spending (all in)
5,892.84% the total cost of New Deal
1,097.06% the total fiscal cost of World War 2

13.718 trillion total New Federal Debt
1,695.11% the total cost of the New Deal
315.57% the total fiscal cost of World War 2

Spending and new debt during the Covid crisis 2020-2021

11.312 trillion in Federal Spending (all in)
5.88 trillion in New Federal Debt
Data on pre Covid causes of death & Covid causes of death

BLS inflation calculations tell us that in the last 16 months new Federal debt grew by 724 billion more than the combined fiscal cost of the New Deal and World War 2 (5,156 trillion)

Annual Federal Revenue is now a mere 11.16% of total Federal debt.

1970 50.62%
1980 58.89%
1990 32.19%
2000 35.98%
2007 28.69%
2021 11.16%

Impact

An 11.16% annual revenue to total debt ratio makes it impossible for the U.S. to accurately report inflation, normalize interest rates or increases in any Federal expense that’s pegged to reported inflation such as Social Security, Medicare, Military or Civilian employee pensions.

If Treasury rates normalized to the 1970 – 2008 average of 8.70%, 68% of all Federal revenue would be consumed by debt service cost alone.

Accurate increases in Medicare would push it’s insolvency date closer than the projected 2026, Social Security before the projected 2028 to 2035.

Under reporting inflation contains the majority of all Federal costs

From 2008 to 2021 Federal debt increased by 200.00% yet annual debt service cost increased by only 30.91%.

Total Federal debt in 2007 8.950 trillion, annual debt service cost 411.32 billion
Total Federal debt in 2020 26.880 trillion, annual debt service cost 538.45 billion

How the U.S. reports budget deficits, the poverty and homeless rates have further eroded U.S. fiscal credibility.

1970-2020 cumulative reported budget deficits $17.857 trillion, cumulative increase in Federal debt $26,515 trillion. According to U.S. politicians the 8.658 trillion doesn’t count because they’re mandatory expenses and they don’t et to vote on them.

Difference between reported deficits and increase in total Federal debt

1970 to 2007 4.021 trillion,
2008 to 2020 4.637 trillion.

U.S poverty rate

The Federal Government has contained the official poverty rate and all subsides linked to the poverty rate by lowering what the poverty rate is.

In 1970 if your income was less than 49.60% of median personal income you were below the poverty threshold and qualified for government assistance.

In 2020 your income needed to be below 21.70% of median personal income to be below the poverty threshold and qualify for government assistance.

Homeless rate

By redefining who’s homeless the Department of Housing and Urban development has reduced the official homeless rate between 2005 and 20920 by 173,691 people.

In 2021 Federal Debt as a percentage of GDP is the worst in history

Regulation, taxation and litigation have destroyed U.S. manufacturing and eliminated over 20 million jobs.

The resulting trade deficits have eliminated 13.95 trillion in domestic wealth, 7.652 trillion since 2008.

Supporting Links & Data

Foreign held Treasury debt now impedes the U.S.’s ability to negotiate fair trade

If the 7.012 trillion in foreign held Treasury debt hits the market for any reason it will create an unprecedented financial crisis, unprecedented dollar sales by foreign investors and additional dollar devaluation fueled by the Federal Reserve’s creation of trillions of dollars trying to support the Treasury market and dollar, hyper inflation will engage.

In 2021 without ongoing Fed intervention the U.S would be insolvent

Since 2008 the Fed’s created over over 8 trillion dollars with keypunch entries to buy debt at non competitive rates the free market wouldn’t. In the last 16 months the Federal Reserve bought more Treasury debt than the previous 50 years.

2020-2021 last 16 months
Federal debt purchased by the Federal Reserve 2.764 trillion
Increase in Federal debt 5.881 trillion
Domestically purchased Federal debt 2.694 trillion
Debt purchased by foreign investors 311.5 billion
Non marketable debt held by Federal agencies & Trusts 111.8 billion

1970-2019 previous 50 years
Federal debt purchased by the Federal Reserve 2.637 trillion
Increase in Federal debt 22.289 trillion
Domestically purchased Federal debt 7.301 trillion
Debt purchased by foreign investors 6.716 trillion
Non marketable debt held by Federal agencies & Trusts 6.01 trillion

Percent ownership of total Federal Debt

2020
Domestic, publicly held Federal debt 35.01%
Federal debt held by foreign investors 24.62%
Non marketable Federal debt held by Federal Agencies & Trusts 21.46%
Federal debt held by the Federal Reserve 18.92%

1970
Domestic publicly held Federal debt 79.58%
Federal debt held by foreign investors 4.12%
Non marketable Federal debt held by Federal Agencies & Trusts 0.00%
Held by the Federal Reserve 16.30%

Income assets and spending in ounces of gold

Personal income in ounces of gold 1981-2021

Gold +36.46%, from 24.67 to 33.66, +8.99 ounces
Dollars +426.59%, from $11,326 to $59,642, +$48,316

2020 33.46 ounces
1981 24.67 ounces
1981-2021 annual average 55.33 ounces
High 2001 117.29 ounces
Low 1981 24.67 ounces

Increase in Median home prices

Gold +1.28%, from 183.32 to 185.67 ounces, +2.24 ounces
Dollars +388.69%, from $68,950 to $336,950, +$268,000

2020 185.67 ounces
1981 183.32 ounces
1981-2021 average 312.01 ounces
High 2000 617.83 ounces
Low 2011 134.10 ounces

S&P 500 futures contract

Gold +721.69%, from 14.78 to 121.47ounces, +106.69 ounces
Dollars +3,147.64, from $6,788 to $220,450 +$213,662

2020 185.67 ounces
1981 183.32 ounces
1981-2021 average 312.01 ounces
High 2000 617.83 ounces
Low 2011 134.10 ounces

GDP per employed person in gold

Gold +8.96%, from 78.27 to 85.28 ounces, +5.23 ounces
Dollars +320.45%, from $35,937.56 to $151.102.75, +$115,165.18

2020 85.28 ounces
1981 78.27 ounces
1981-2020 average 153.27 ounces
High 2001 297.62 ounces
Low 2012 73.07 ounces

Per capita

Gold +16.80%, from 31.14 to 36.37 ounces, +5.23 ounces
Dollars +350.72%, from $14,297.62 to $64,443.08 +$50,145.46

2020 36.37 ounces
1981 31.14 ounces
1981-2020 average 67.64
High 2001 137.94 ounces
Low 2011 31.14 ounces

Federal revenue per employed person in gold

Gold -7.34%, from 14.74 to 13.66 ounces, -1.08 ounces
Dollars +257.58, from $6,766.66 to $24,196.85, +$17,429.94

2020 13.66 ounces
1981 14.74 ounces
1981-2020 average 27.13 ounces
High 1999 56.20 ounces

Per capita

Gold -0.67%, from 5.86 to 5.82 ounces, -0.04 ounces
Dollars, +283.32%, From $2,692.19 to $10,319.60, +7,627.14

2020 5.82 ounces
1981 5.86 ounces
1981-2020 average 11.98
High 1999 26.03 ounces
Low 2011 5.00 ounces

Federal spending per employed person in gold

Gold +85.26% from 16.34 to 30.28 ounces, +13.93 ounces
Dollars +614.91% from $7,504 to $53,647, +46,143

2020 30.28 ounces
1981 16.34 ounces
1981-2020 average 32.86
High 2001 59.53 ounces
Low 1981 16.34 ounces

Per capita

Gold +100.86% from 6.50 to 13.06 ounces, +6.56 ounces
Dollars, +675.08% from $2,985 to $23,140, +20,154

2020 13.06 ounces
1981 6.50 ounces
1981-2021 average 14.48
High 2001 27.59 ounces
Low 1981 6.50 ounces

Federal debt per employed person in gold

Gold +349.38%, from 23.73 to 106.65 ounces, +82.92 ounces
Dollars +1,634.08%, from $10,897 to $188,966, +178,069

2020 106.65 ounces
1981 23.73 ounces
1981-2020 average 97.51
High 2001 161.09 ounces
Low 1981 23.73 ounces

Per capita

Gold +387.20%, from 9.44 to 46.00 ounces, +36.56 ounces
Dollars, +1,780.03%, from $4,335 to $81,507, +77,172

2020 46.00 ounces
1981 9.44 ounces
1981-2020 average 43.17
High 2001 74.66 ounces
Low 1981 9.44 ounces

What could clean up this mess?

Fiscally responsible politicians on both sides of the isle
Giving up on trying to spend out of every crisis, 28.5 trillion in new debt proves it doesn’t work
Balanced budgets and paying down debt to minimize the damage to future generations
Effective regulations rather than regulations that foment fines & litigation
Bring companies back to the US by hiking tariffs rather than taxes
Trade surpluses rather than trade deficits,
Transparency in Federal revenue and expenditures that’s easy to understand and follow
Citizens joining Patrick Henry’s united we stand divided we fall party rather than being pawns of Julius Caesar’s divide and conquer.
Have a government that was afraid of voters rather than voters being afraid of government

What’s more likely to happen

Annual Federal Revenue is now a 11.16% of total Federal debt, this ratio makes it impossible for Federal government to raise interest rates high enough to attract enough buyers to finance the ongoing record deficit spending.

For the U.S to remain solvent the Federal Reserve has to continue creating trillions of dollars with keypunch entries to buy all the debt the free market won’t.

We see total Fed created money increasing from 8.24 to 13.53 trillion by the end of 2026
Treasury debt owned by the Federal Reserve increasing from 5.30 to 8.66 trillion
Other debt owned by the Federal Reserve increasing from 2.898 to 4.689 trillion

This Fed link to monitor the creation of money
This Fed link to monitor Treasury debt owned by the Federal Reserve

Record spending plus the creation of money to fund it equals inflation

Our estimate puts average annual BLS reported inflation above 4.50% through 2026.
Actual inflation averaging more than 5.25%.
Shadow Stats puts the average above 7.50%.

Dollar devaluation and negative rates of return are here to stay.

- Inflation and debt monetization have fully engaged
- Real rates of return aren’t going to happen this decade
- Record deficit spending and the Fed’s creation of money to fund it will fuel inflation higher
- .U.S’ debt will be downgraded two more times before the end of 2029
- Sales of over 7 trillion in foreign owned debt and dollars will engage
- The Fed will create trillions more trying to support the U.S. debt market and dollar
- Inflation will escalate moving above 6.00%
- Growth in Federal debt will outpace growth in federal income 1.5 to 1
- Desperate for income politicians will pass increases in income, corporate and long-term capital gains taxes forcing more corporations and citizens offshore
- Trade deficits will increase
- Stocks will have 1 to 3 corrections with recovery to new highs fueled by dollar devaluation.
- Proceeds from stock sales may go into Federal debt short-term but just until these dollars find new homes in tangible assets, quality stocks and higher rated debt.
- Mortgage delinquency rates will increase from 2.75% to more than 5.00%
- Federal Reserve ownership of mortgage backed securities will increase from 2.422 to over 4 trillion
- A temporary selloff in real estate will be caused by higher rates, higher taxes, higher inflation, decreasing affordability, with a recovery to new high fueled by dollar devaluation.

It’s going to be a exciting decade to trade packed with beautiful up and down trends if you have any questions or need additional information please contact me.

Peter Knight Advisor
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Peter_Knight@peterknightadvisor.com

Risk Disclosure

Any allocation can be traded automatically

All objective programs are fully automated through our platform on ChartVPS using CQG integrated client linked to multiple exchange members worldwide. Overall account risk is defined before the first trade goes on. We cover all platform costs and base compensation on 5.00% to 12.50% of net new high profits quarterly. Allocations can be changed at any time, liquidity in portion or all in any major currency, 2 to 48 hours.

2) Structure and Account Opening Procedure

3) As an ATA Client you maintain control of

- - The market(s) you trade and when
  - The methodologies you trade
  - The level of leverage that suits your risk tolerance
  - The overall risk for your account

4) ATA Team responsibilities include

- - Calculating entries, risk levels and profit objectives
  - Placing all orders and diligently overseeing executions, positions and balance
  - Monitoring total account risk to ensure it is within your defined guidelines
  - Ensuring everything is done correctly and assuming liability if it’s not
  - Answering all your questions on markets and methodologies

5) About this ATA

- - All ATAs use fully disclosed trading methodology
  - All trade with the trend long or short
  - Mark-to-market positions and balance are available at any time
  - Statements disclose, positions, liquidating value, and any trading activity
  - Monthly statements summarize all activity and end of month balance
  - Liquidity for ATA accounts in portion or all is 2 to 48 hours
  - AIM ATA’s afford you the opportunity to modify markets, units you trade and your overall account risk level at any time

6) Summary

- - All trades are done automatically using fully disclosed trading methodology.
  - 2014-2025 performance by market, contact size and time period traded
  - Trade any allocation from the top 50 on this page minimums 25K-500K or design your own using the instructions & spreadsheet below or on this page minimums,10K+
  - Allocations can be changed at any time.
  - Review the risk for your allocation (potential drawdown & liquidating value stop loss)
  - Message us with your country, markets, contract sizes and periods you’d like to trade and we’ll send opening link(s) from a firm on this list that can accomodate your jurisdiction, markets and minimum.
  - All balances are guaranteed plus or minus trading activity by the CME
  - Maximum risk is defined before the first trade goes on (liquidating value stop loss)
  - Our Fee Structure
  - Account liquidity in portion or all, 2-48 hours in any major currency
  - Message or contact me with any questions.

If you have questions send a message or contact me

Regards,
Peter Knight

—————————————————————-

Risk Disclosure

About Heating Oil Futures

Heating Oil futures (HO) at CME Group allow you the opportunity to profit from or hedge against the price movements of this refined byproduct of crude oil.

More than 8 million homes in New England and the Central Atlantic region lack access to natural gas and depend on heating oil for energy during the coldest months of the year.

However, the heating needs of these households take a backseat to the gasoline demands of the nation, as both are byproducts of crude oil and must share the services of refineries already running at capacity.

The juggling of the capabilities of oil refineries coupled with the seasonal factors that impact heating oil’s demand make the trade in HO a dynamic and beneficial marketplace for a variety of speculators and hedgers.

The Contract

Each Heating Oil futures contract represents 42,000 gallons of heating oil with a minimum price fluctuation of $.0001 per gallon, or $4.20 per contract. The contract trades Sunday-Friday from 5 p.m. to4 p.m. Central Time (CT) with a daily 60-minute break at 4 p.m. CT.

Trading the Market

Traders of HO should be alert to the factors impacting the price of heating oil such as: weather, the price of crude and the capacity of oil refineries.

As heating oil is used for heating, the demand for the product rises as the temperature drops. Indeed, heating oil is one of the most seasonally impacted of all the commodities; market participants should monitor news about weather and oil in order to best seize profit opportunities and hedge against risks in the heating oil market.

If you have any questions send a message or contact me

Regards,
Peter Knight Advisor

—————————————————————-

The Benefits of Liquidity

The Benefits of Liquidity

Liquidity is perhaps one of the most important elements in gauging opportunities in a market.

At its core, liquidity is the collective expression of traders’ opinions on the market.

Like any other market, these opinions are represented in a futures market either as existing positions held by traders, known as open interest, or as buy or sell orders communicated to the rest of the market but yet to be executed.

The size and price of these orders may vary considerably, but the key element to consider is that the more opinions that are expressed in the market, the more liquid the market is.

Liquidity is such an important element of market opportunity because the more participants there are, the more expressions of opinion on the market, the greater the likelihood that a single trader, like yourself, will encounter another with an opposing viewpoint that results in you both agreeing on a quantity and price to trade.

Example

Compare the Natural Gas (NG) futures market to the U.S. natural gas (UNG) ETF market. One NG contract is equivalent to 10,000 mmbtu of natural gas exposure. At a price of $2.722 per mmbtu, the notional, or dollar, value of a single contract is $27,220.

Notional Value = Price X Contract Multiplier

Notional Value = $2.722 X 10,000 (NG multiplier)

Notional Value = $27,200

At an average daily volume of 322,441 contracts as of fourth quarter 2014, the dollar value total of natural gas futures traded between participants on an average day is just shy of $8.8 billion.

The UNG ETF contract, which tracks the price of natural gas, trades at $13.94 per share. UNG reports an average daily volume of 12,582,300 shares, making the average notional value traded within the market of only about $175 million per day.

Conclusion

Understanding liquidity in a market is a critical consideration for traders before jumping into a trade. Futures markets offer deep liquid markets that let traders express their opinions in a tremendously efficient way.

If you have any questions send a message or contact me

Regards,
Peter Knight Advisor

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Natural Gas Calendar Spread Options

Calendar Spread options, or CSOs, are options on the spread between two futures contract months, rather than a single underlying contract month.

Unlike vanilla options that give the holder the right to enter a long or short futures position, calendar spread options exercise into two separate futures positions: one long and one short.

For example, a Natural Gas option derives it price and potentially exercises into a Natural Gas futures contract. Whereas, a Natural Gas calendar spread option derives its price from the price differential between two Natural Gas futures contract months.

The Natural Gas term structure is defined by seasonality. The withdrawal season, thought of as winter, ranges from November to March and is noted for its volatility. The injection season, referred to as summer, ranges from April to October and is generally less volatile.

During the winter season, gas consumption peaks because of increased heating demand from residential, commercial and industrial end-users.

During the summer season, gas demand decreases while production continues, resulting in excess natural gas to can be stored. Because of unpredictable winter demand, the winter Natural Gas futures typically trade at a premium to the summer futures.

Calendar Spread Options provide a leveraged means of hedging against, or capitalizing on, a change in the shape of the futures term structure.

A call option can be exercised into a long futures position that is closest to expiration and a short futures position in a more distant month. The put option can be exercised into a short futures position that is closest to expiration and a long futures position in a more distant month. The strike price is the price differential between the long and short futures positions.

CSO Example

A trader is expecting a colder-than-normal winter and is bullish on the March/April spread, expecting March futures prices to trend much higher relative to April futures prices.

On December 1, the March/April spread is trading at a differential of 20 cents with March at $3.10 and April at $2.90.

The trader believes the March/April spread will settle higher than $1 when it expires at the end of February. The trader purchases a CSO call on the March/April spread at a strike price of 65 cents at a cost of 13 cents.

In order to break even, the March/April spread must reach at least seventy-eight cents upon expiration.

Purchasing a call limits the trader’s downside risk versus going long the futures spread. The maximum loss on the CSO is the premium paid, 13 cents, where the maximum loss on a futures position can be much greater.

At March futures expiration, the March/April spread settles at 1.10: March at 4.20 and April at 3.10.

The trader’s bullish sentiment was correct – and his CSO call settled in-the-money by 45 cents, netting a profit of 32 cents.

Traditionally, market quotes on CSOs were obtained through a broker or chat system. Now, market participants can transact CSOs through electronic trading platforms, like CME Direct.

Request for Quote

A Request for Quote (RFQ) is created by a market participant by selecting the option instrument or option spread instruments. An RFQ allows the submitter to anonymously gauge the market for price and size for an instrument or strategy. After the RFQ has been processed by CME Globex, the Request for Quote and any associated market price and size is disseminated to the marketplace.

Traders can then execute based on those prices or counter with their own price. Or they can do nothing at all – because there is no obligation to trade on a submitted RFQ.

Oil and gas prices are highly elastic with respect to various fundamental factors including weather, geopolitical risk and unanticipated supply and demand. Unpredictable changes from any of these factors can have an impact on forward curve prices and the correlation between the calendar months.

Calendar spread options provide a leveraged means of hedging against or capitalizing on, a change in the shape of the futures term structure. CME Group has a diverse product offering of Calendar Spread Options across Crude Oil, Natural Gas and Refined Products.

If you have any questions send a message or contact me

Regards,
Peter Knight Advisor

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Introduction to Natural Gas

Natural gas is the third most important source of energy after oil and coal. The use of natural gas is growing quickly and is expected to overtake coal in the second spot by 2030.

Natural gas was first developed commercially in 1825 in the United States, but took off as a major source of energy around the world in the 1970s. Today, natural gas is used by power plants to generate electricity, as well as for domestic cooking and heating.

The world’s largest producers of natural gas are currently the United States, Russia, Iran, Qatar, Canada, China and Norway. These countries have excess natural gas that can be exported to other countries around the world, which is either transported through pipelines or as liquefied natural gas (LNG).

LNG

LNG is natural gas that has been cooled to a temperature of minus 260 degrees Fahrenheit, or minus 160 degrees Centigrade. At that temperature, natural gas becomes a liquid and can be transported around the world by special refrigerated transport ships.

When it reaches its final destination, the LNG is allowed to regasify and can be sent through the normal pipeline system. Before the development of LNG, gas markets around the world operated independently, as they were based on local pipeline networks.

Regional Natural Gas

The three most developed demand centers for natural gas are western Europe, North America and north Asia. These regions have dense pipeline networks and high demand for natural gas.

Henry Hub

Natural gas is the fastest growing energy source in north America. There are dozens of natural gas trading hubs around the United States. But by far the most dominant is the Henry Hub in Louisiana. Henry Hub is strategically situated in a major onshore production region and is also close to offshore production.

Henry Hub also has excellent connectivity to storage facilities and to pipeline systems. This allows natural gas to be moved from supply basins and exported to major consumption markets. This highly integrated network is served by both interstate and intrastate natural gas pipelines. It is no surprise that the price of natural gas at Henry Hub has become the dominant global reference price for natural gas. Henry Hub is the delivery location for Natural Gas futures contracts at CME Group, the largest gas futures contract in the world.

UK and Norway

In western Europe, gas is the dominant fuel for electricity production. Prices are set at several trading hubs around the region. The two most important hubs in the region are the National Balancing Point or NBP in the UK and the Title Transfer Facility or TTF in the Netherlands. CME Group lists futures contracts based on both the NBP and TTF.

North Asia

In Asia, there tend to be fewer pipeline connections between different countries than is the case in Europe and North America. This explains why, until now, there has been no major price benchmark for natural gas in Asia. But this situation is changing with the increase in Asian imports of natural gas in the form of LNG. Platts, the price reporting service, assesses the north Asian LNG price through its Japan/Korea Marker or JKM index, which is listed for trading on CME Group.

Summary

The development of LNG means all the major production centers are now linked to the major demand centers. For the first time in history a truly global gas market is evolving.

If you have any questions send a message or contact me

Regards,
Peter Knight Advisor

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Introduction to Natural Gas Seasonality

Learn About Natural Gas Seasonality

When it comes to natural gas prices, traders see regular patterns of price fluctuation throughout the year. These patterns reflect the seasonal changes in weather.

Seasonality plays an important role when analyzing natural gas supply and demand. It helps gas producers, storage facilities and energy utilities manage their physical volume exposure as well as financial price risk in the market. By anticipating seasonality, they can adjust their operations and look to reduce their financial risks. Supply, demand and storage are the three major factors used in analyzing natural gas seasonality. Gas production is relatively stable, but may experience unexpected disruptions such as unscheduled pipeline maintenance, explosions or extreme weather.

In the United States, the gross production of natural gas has increased steadily over the past five years.

Within each of those years, seasonality plays a small role in production level changes. Seasonality patterns appear regularly on storage and consumption volumes, where there is a relative high price elasticity. This means storage levels and gas consumption respond quickly to market price changes.

You can see seasonality in this chart of U.S. monthly underground storage of natural gas. Storage levels tend to be highest between the end of October and mid-November, during the lead up to winter, and lowest at the end of winter after a season of high consumption.

Consumption Driving Patterns

When you look at consumption, heating and cooling demand are the main drivers for the cyclical pattern. In winter, the increase of space heating for both residential and commercial use leads to the surge of demand of natural gas. During the summer, use of natural gas is much lower due to summer cooling through air-conditioning. Other factors may influence the demand of natural gas, including climate change and the price of competing generation fuels sources such as coal and fuel oil. We can see the seasonal curve of storage matches the consumption curve. One of the most liquid futures contracts, Henry Hub Natural Gas futures, shows a distinct seasonal pattern. The cyclical change of production, storage and consumption are reflected on the price of this derivatives contract.

Having a general understanding of seasonality in natural gas markets and the potential impact on gas prices is important to anyone planning a natural gas trading strategy.

If you have any questions send a message or contact me

Regards,
Peter Knight Advisor

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Oil: How the Market Dynamics Have Changed

Oil prices are rising, driven by strong global growth and the reemergence of a Mideast risk premium. The market dynamics of this round of oil price increases, however, are strikingly different from recent episodes, such as in 2008 or 2012-2013. There are two key differences this time around that deserve our focus: (1) shale oil supply may respond more rapidly to price incentives than older technologies, and (2) the U.S. is now an oil exporter (as well as importer). As we explore these two topics, we will see some special nuances and caveats, too.

Figure 1: WTI Crude Oil Prices since 1996.

The collapse in the price of oil that began in the fourth quarter of 2014 and hit its trough in February 2016 was a delayed response to the massive increase in supply brought about by the U.S. shale oil revolution. The first stage of the price recovery during 2016 into the $40 to $55/barrel range was mostly an unwinding of the price, having been driven considerably below the marginal cost at which U.S. shale producers could profitably extract oil. During the oil price slide, there was selling by institutional pension and endowment funds, mostly through third-party managers, as these funds cut their asset allocation to commodities in general and oil in particular. There were also forced liquidations due to financial distress among certain oil market participants. Once the asset allocators had rebalanced and the financial distress selling had ended, the oil price drifted back up to better reflect the supply economics of the shale extractors who were emerging as the swing producers to challenge OPEC in the global market.

We are now in a second stage of price increases taking the range up toward $60 – $85/barrel. This time around the drivers are, first, the faster pace of global growth and secondly, the arrival of a Mideast risk premium due to rising tensions between Iran and Saudi Arabia, major oil exporters. (See CME Group Senior Economist Erik Norland’s research report from March 21, 2018, “Oil: Could Iran Risk Reverse Options’ Bearish Signal?” . Both the global growth and Mideast risk premium price drivers are expected to remain in play for the rest of 2018 and into 2019, keeping upward pressure on the price of oil. There are, however, mitigating factors, too.

Figure 2: Improving Global Growth Driving Oil Demand Higher.

With U.S. shale oil producers able to lift production more rapidly than more traditional extraction technologies, oil supply may be more elastic, at least over a 6-to-18-month time horizon than during past episodes of oil price rises. OPEC, or we should say Saudi Arabia and Russia, may also stop curbing production as prices rise closer to their target range.

In addition, at the end of 2015, the U.S. lifted its ban on oil exports, and since then the U.S. has become an important oil exporter on the world scene even as the U.S. continues to import oil. The importance of the U.S. being a meaningful oil exporter does not so much impact the level of prices as it does to forge a tighter linkage between competing benchmarks, especially West Texas Intermediate (WTI) and North Sea oil or Brent. Let’s turn first to the increased supply elasticity factor and then to the links between WTI and Brent.

Increased Oil Supply Elasticity

When a commodity has a relatively fixed or inelastic supply, then for given changes in demand the impact on prices is magnified compared to a commodity with highly flexible or elastic supply. Natural gas is an example of a commodity in which supply responses to higher or lower prices are highly constrained in the short and even medium term. Not surprisingly then, natural gas exhibits considerable price volatility due to demand swings, often driven by changing weather patterns.

Even before shale oil, crude oil production was always more elastic and responsive to price changes than natural gas. Short-term demand changes may be met by adding to or withdrawing from inventories. Also, Saudi Arabia often acted as the swing producer, feeling that it was in its long-term interest to have a less volatile price of oil. If upward price pressures persist and are perceived as long lasting, then both U.S. shale producers and OPEC may implement plans to increase long-term production.

Clearly, shale oil has changed the calculus for medium-term supply responses. Shale wells can be drilled and completed much more rapidly than traditional wells. With shale, the oil production peaks after 3 or 4 months and then declines towards zero in 18 to 24 months. What this means is that if the oil price rises considerably above the marginal cost of completing a new shale well, then shale oil producers can respond relatively rapidly to higher oil prices. Since the shale production occurs over an 18-to-24-month time span, the impact on supply will dissipate naturally if the price falls and removes the incentive to put more shale wells into production. We also note, that shale producers are more likely to use risk management techniques, especially strips of oil futures contracts, to hedge price risk, since the flow of production from a shale oil well is reasonably predictable over its 18-to-24-month life. This means that the production pattern from that well will be unaffected by any subsequent price changes. Oil production six to 12 months out, however, still will depend on new shale wells going into production, which will be a function of price, as well as many other constraining factors.

While the estimated marginal cost of putting new shale wells into production is a key metric, a sole focus on marginal costs will tend to over-estimate the supply response to higher prices. Not all shale oil rigs are created equal. Modern rigs can maximize output with sophisticated drilling sensors and more precise geological mapping. As supply ramps up, some older, less efficient rigs may enter production, too. Rigs also require skilled workers, who may be in short supply as production rises. Inputs into the hydraulic fracturing process may also hit constraints, such as the supply of sand to mix with water and pump into the wells. We note that while financing is generally available, there can be delays in arranging financing for capital projects and rising interest rates are raising financing costs. Finally, one needs to consider that from time to time, there may be limits of the quantities of certain types of oil that refineries can easily accommodate, which could limit shale’s production temporarily.

Figure 3: Oil Production in the Three Major Countries.

None of these constraining factors are going to stop the rise of shale oil production in the U.S. as oil prices rise and remain above $60/barrel. We want to caution that the estimating a supply response to higher prices is much more complex than simply looking at the spread of the oil maturity curve versus the expected costs of production.

This time around, with oil prices above $60/barrel and rising with global growth and Mideast tensions, the production increases in the second half of 2018 and into 2019 are likely to take U.S. oil production toward 12 million barrels per day in 2019. This compares with current Russian production of around 11 million barrels per day and Saudi Arabian production of about 10 million. One must remember that just before cutting production, both Saudi Arabia and Russia bumped production up close to their limits to make the cuts look bigger. Still, if we are correct that OPEC may roll back its production restraints, then as much as 1.5 million additional barrels a day of Saudi oil may be coming to market in 2019 and possibly 0.5 million barrels a day of Russian oil.

This amount of new production would put a cap on oil prices even with growing global demand if it was not for the Mideast risk factor. To estimate the current Mideast oil premium, we want to examine the oil price futures maturity curve. The oil curve is in backwardation as of mid-April 2018, with WTI nearby month prices over $65/barrel, while the 24-month futures price is close to $57/barrel. There are other factors influencing the maturity curve than the Mideast risk premium, but as recently as October 31, 2017, the curve was flat in the mid-$50s territory. We estimate that a $7/barrel risk premium may already be priced into the market and a $10 to $12/barrel premium is possible if Saudi-Iranian tension continues to escalate.

Figure 4: WTI Crude Futures Prices Maturity Curves.

The shape of the maturity curve also has a big impact on the willingness of shale oil producers to expand production. The spot price is the headline grabber, but the 6-to-24-month futures curve represents prices at which future production from a completed shale oil well can be hedged. And the 6-to-24-month futures price range is still below $60/barrel. That is high enough to incent more production, yet again we are sounding the warning not to get too excited about future U.S. oil production going through the roof – steady growth though, seems highly likely.

U.S. Oil Exports and the Brent-WTI Price Spread

What matters to the Brent-WTI price spread is the connection point around the world. Back in the early stages of the shale oil production ramp-up, oil production overwhelmed the pipeline infrastructure and the Brent-WTI spot price spread widened to $20/barrel or more. Then, railroads came into play and massively increased capacity to bring Bakken oil to the East Coast refineries, where it could compete with Brent, or Brent substitutes, being shipped from Europe and the Mideast. That drove the spread closer to $10/barrel, or more or less the cost of railroad transport. As the pipeline infrastructure was improved the price spread narrowed further. And with the U.S. now an oil exporter, the global connection price is partly determined by shipping costs.

Figure 5: US Import/Exports of Oil.

Figure 6: Brent and WTI Spot Price Spread.

Shipping costs are a moving target, due to different vessel sizes, different contract terms (spot or term contracts for multiple shipments), fuel costs, etc. Nevertheless, somewhere in the $4 to $5-plus range, a tanker full of U.S. crude can leave the U.S. Gulf of Mexico and head for Europe or China. As more and more U.S. shale oil production comes on line, some of it will find its way to export facilities in the Gulf of Mexico and thus serve as a key link in the Brent-WTI price spread determination process.

Conclusions

U.S. oil production may steadily rise to over 12 million barrels a day by the second half of 2019, so long as the 12-to-24-month futures price of oil remains around $55/barrel or higher. Note, that it is the medium-term futures price, not the spot price, that will drive U.S. production higher.
If Saudi Arabia and Russia resume full production as oil approaches their price targets, the combination of U.S., Saudi and Russian oil production increases may serve as powerful limit on further oil price increases.
The upside wild card is the Mideast oil price risk premium, currently estimated at $7/barrel, which could go higher if Saudi-Iran tensions worsen.
The downside wild card is the sustainability of healthy global growth, which would be endangered if a full-scale tit-for-tat trade war broke out.

If you have any questions send a message or contact me

Regards,
Peter Knight Advisor

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Is Crude Oil Taking Cue from Vegetable Oils?

It looks like the ultimate case of the tail that wagged the dog: soybean oil foreshadowing price trends of crude oil (Figure 1). It seems odd. How could the modest soybean oil, whose average daily volume in dollar terms amounted to $2.8 billion in February 2017, lead the colossal West Texas Intermediate crude oil market, whose volume that same month was 21 times greater?

Everybody knows that the muscles in a dog’s tail aren’t strong enough to wag the animal but, as any dog owner knows, a canine’s tail is highly expressive and can indicate its feeling and what it intends to do. Likewise, it’s fairly obvious that vegetable oils aren’t causing crude oil prices to move up or down. But the vast difference in the size of the crude oil and vegetable oil markets may be a part of the explanation for their behavior. Because of the relatively small size of the market, vegetable oil prices may be highly sensitive to subtle supply and demand shifts in crude oil.

Figure 1:

The key mechanism that drives the relationship is biofuels. Sixty-four countries have or are considering biofuel mandates or targets, including the 27 nations of the European Union. If crude oil is in short supply, refiners may increase their purchases of biofuels, driving the price higher. Likewise, if crude oil supply is abundant or if demand is weak, refiners may reduce their buying of vegetable oils, driving the price down in a manner that appears to anticipate a coming decline in crude oil prices.

Over the past dozen years, the relationship between movements in vegetable oil prices and ensuing changes in crude oil prices have been quite remarkable:

Soybean oil ignored the rally in crude oil prices in 2006, and later that year crude oil prices corrected lower to the level of soybean oil prices.

As crude oil was falling in late 2006 and early 2007, soybean oil prices began to surge, ahead of the massive January 2007 to July 2008 bull market rally in crude oil to its all-time high.

Soybean oil prices peaked in March 2008, four months before crude oil prices reached their all- time highs in July of that year.

Soybean oil prices hit bottom in December 2008, followed four weeks later by crude oil. By the time crude oil prices had regained their footing in February and March 2009, soybean oil was well into a rally.

Vegetable oil prices reached their post-financial-crisis peak in February 2011, almost three months before crude oil prices topped out at the end of April 2011.

While crude oil prices range-traded between $80 and $115 per barrel from 2011 through mid-2014, vegetable oil prices began a long bear market that foreshadowed the abrupt collapse of crude oil in late 2014.

Soybean oil prices bottomed in August and September 2015, almost six months before crude oil prices hit bottom in January and February 2016.

Recently, soybean oil prices have been plunging even as crude oil rallies. Does this presage a coming decline in crude oil price?

There is no guarantee, of course, that such a relationship will hold up in the future. There are at least two factors that could temper the apparent relationship between vegetable oil and crude oil prices: 1) some countries may sour on biofuel mandates and repeal them. 2) if crude oil traders accept that vegetable oils may be a leading indicator of crude oil prices, they might change their behavior and respond more quickly to moves in vegetable oil prices. However, that doesn’t appear to be the case for the moment.

For the time being, crude oil traders might well be advised to heed the most recent moves in soybean oil and palm oil, and to give serious consideration to the possibility that the next move in crude oil might be downward. There are other reasons to think that crude oil might be vulnerable to a decline, including:

Inventories, which continue to grow, are up 7% year on year.

U.S. production continues to grow and is up nearly 600,000 bpd since July.

Oil and gas rig counts continue to rise, implying a further increase in U.S. production over at least the next two months, if not longer.

Oil markets might also get jittery if they begin to doubt the Organization of Petroleum Exporting Countries’ ability to maintain production cuts in May when the producer group must decide if it will extend its six-month output reduction agreement that began January 1.

Oil prices have plenty of upside risks as well, including those coming from possible increases in demand and potential supply disruptions. That said, if oil prices were to fall over the coming weeks or months, don’t say that the vegetable oil markets didn’t warn you.

If you have any questions send a message or contact me

Regards,
Peter Knight Advisor

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