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Scott Barlow

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Markets don't make a lot of sense this morning.

Crude prices and the U.S. dollar are both lower, and conventional wisdom attributes this to uncertainty ahead of Wednesday's Fed meeting.

Central bank policy is clearly running the market show here, but if investors were concerned about hawkish noises from chairwoman Yellen, the dollar would be higher and oil lower and dovish fears would have the reverse effect. I suspect the market has little clue at the moment.

"Next oil downturn? Looming gasoline glut threatens crude's rebound" – Reuters
"Halliburton says it cut 6,000 jobs in Q1, delays earnings call" – CNBC
"@JKempEnergy HEDGE FUNDS raised net long position in Brent by almost +48 million bbl last week (+13%) to a record 403 million bbl pic.twitter.com/HAqjIRvlf3 ' (includes chart) Twitter

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A remarkable Wall Street Journal feature detailed the oil and gas operation behind the brutal Islamist State terrorist organization,

"Islamic State oil man Abu Sayyaf was riding high a year ago. With little industry experience, he had built a network of traders and wholesalers of Syrian oil that at one point helped triple energy revenues for his terrorist bosses…

"Last May, U.S. Special Forces killed Abu Sayyaf, a nom de guerre, at his compound in Syria's Deir Ezzour province. The raid also captured a trove of proprietary data that explains how Islamic State became the world's wealthiest terror group.

"The areas around the fields became scenes of occasional horror, said [a] drilling technician who fled Syria last year: 'You go to work and you find someone beheaded.'"

" The Rise and Deadly Fall of Islamic State's Oil Tycoon" – Wall Street Journal

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Bloomberg is warnings that 'bond investors could get massacred' but given Japan's example, I'm not sure how seriously to take the story. Since the late 1990s, shorting Japanese bonds with the belief that interest rates were set to jump higher became known the "the widowmaker" trade, and the rationale behind current concerns about global debt markets sound similar,

"While demand has shown few signs of abating, investors are setting themselves up for damaging losses if average yields rise even a little from their rock-bottom levels. Based on a metric called duration, a half-percentage point increase would result in a loss of about $1.6-trillion in the global bond market, according to calculations based on data compiled by Bank of America Corp."

"It's Dangerous Out There in the Bond Market" – Bloomberg
"@TheStalwart Bond investors could get massacred here. bloomberg.com/news/articles/… pic.twitter.com/A9sUlTVH5Y " – Twitter (excerpt)

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FT Alphaville's Matthew Klein did a podcast with famed short-selling hedge fund manager Jim Chanos. The interview featured an absolutely stunning (for me anyway) statistic behind Mr. Chanos' bearish view on China,

"A real estate analyst was addressing the partners and he said: 'Currently there's 5.6 billion square metres of high rises in China under construction. Half residential, half office space.' And I thought for a second and I said: 'No, you've gotten the American, rest of the world metrics wrong. You must mean 5.6 billion square feet. Because 5.6 billion square metres is roughly 60 billion square feet.'

"And my analyst looked at me sort of terrified. He was a young analyst at the time. He said: 'I know. I double checked. It's 5.6 billion square metres.' And I thought for a second and I said: 'Well if half of that's office space, that's roughly 30 billion square feet of office space. And that's a five foot by five foot office cubicle for every man, woman and child in China.'"

"Podcast: Jim Chanos on the art of short-selling" – (there's also a transcript) Klein, FT Alphaville

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Tweet of the Day: "@CarmichaelTed Why Does the Bank of Canada Now Believe that Fiscal Stimulus Works? See my new post at: tcglobalmacro.blogspot.ca/2016/04/why-do… " – Twitter

Diversion: I never bought a Prince disc and never saw him live, but as I child of the 80s, I was more affected by his death than I expected. An interview from the Washington Post detailed the close and unlikely guitar-based friendship between His Purpleness and ZZ Top's Billy Gibbons,

"'Defying description': ZZ Top's Billy Gibbons on Prince the 'sensational' guitarist" – Washington Post

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