Canada Be Ballin

I thought I’d take another sports break from the markets. Don’t worry it’s not more gambling advice but my calls may be just as implausible as those NCAA football picks from last fall.

Don’t look now but Canada is putting together an exceptionally talented basketball team to compete on the world stage. The battle is routinely just for second place behind the NBA’s traveling all-star team every two years, but with their youth and athleticism, Canada’s ready to really upend the international basketball hierarchy. Spain, Argentina, and France are aging and if the Canucks can put together the right type of offensive and defensive schemes from a chemistry standpoint, then Canada just may have a slim chance at the championship games at the Olympics next year and the World Cup in 18.

It may be hard to wrap your mind around right now considering that Steve Nash passed on even playing for them due to a total lack of competitive ability by the national team. Plus c’mon, Canada is the land of hockey and always will be. But consider, the last two #1 overall NBA draft picks were Andrew Wiggins and Anthony Bennett, both Canadian. To genuine fans of the sport of basketball, Canada’s potential rise in the world ranks should not come as a surprise. We’ve been watching top-level talent filter down into the NCAA programs for several years now.

Assuming contracts and obligations allow for participation, here’s the roster I’d like to see Canada field for the foreseeable future. The statistics are for the current NBA season, except for the 3 players at the bottom who do not play in the league.

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All of the players except for Sacre and Bachynski can play at least one position bigger or smaller, so the team is highly versatile from a size and capability standpoint. This current roster seriously lacks in international experience and the average age of the team is only 22 years old. However, that overall youthfulness may play in their favor if they have the sheer energy and stamina to outpace teams. That’s going to be tough going up against the seasoned countries previously listed whose ball control and championship experience may negate any favorable age difference that Canada brings to a game.

The only player that really jumps out for most fans is probably Andrew Wiggins as he’s the clear front runner for rookie of the year, but the world stage may be all that some of these other players really need to showcase their respective skill-sets. Wiggins is a proven commodity. Bennett wasn’t a number one overall pick for no reason. The kid was dominant in his single season of college as a freshman at UNLV. He’s dealt with some unusual injury issues and there are questions about his stamina at the pro level but this summer may provide a window into what he may finally be capable of in the NBA. Sometimes all it takes is a spark of confidence to build some momentum with a young talent.

I think Thompson may be the most unappreciated talent out of everybody. Half of his rebounds are offensive which is simply incredible. I hate to use hyperbole here but I haven’t seen a nose for the ball like Tristan Thompson’s since watching Dennis Rodman. I think Thompson has the athleticism and skills to lead the NBA in rebounding for several seasons. He just needs starter minutes and the confidence to go after that title as the best rebounder in the league. He’s beastly as a power forward and I really think he’s going to open a lot of eyes next year at the Olympics; maybe even in the playoffs this season.

Stauskas and Ennis have made virtually no impact in their very young NBA careers thus far, but that doesn’t mean anything as repping your country and having the confidence of the coach to really put your talents to use without fear of retribution can potentially help these two youngsters blossom. Stauskas was the Big Ten player of the year and he pretty much scored at will against some of the toughest teams in the NCAA. He’s a willing passer who can make savvy plays as a 6’6 sharpshooter. Ennis was unfortunately drafted onto a Suns team that already had 3 stud point guards which has appeared to have dampened his confidence. The player I watched as a freshman at Syracuse last year was the best freshman point guard in all of Division 1. He only averaged 12 points a game, but the poise and confidence that he played with belied his age and experience. It’s my hope we get that level of control on full display while representing Canada.

Cory Joseph really just started to hit his stride last season for the Spurs. When Patty Mills went down, that gave Joseph a ton of backup minutes to Tony Parker and you can tell that coach Popovich’s confidence in Joseph really helped him breakout. Joseph is having a nice season this year for the Spurs. That championship experience will be extraordinarily important as Joseph will most likely be the leader of this young Canadian roster. I am looking for him to be the key guard on this team and expect him to get a lot of looks as a scoring playmaker.

Olynyk is a nice stretch big man who should be the key “pick & pop” man for the team. I can see how he may be labeled a little soft as he’s only averaging 5 rebounds a game as a 7-footer, but the same could be said for a majority of Caucasian foreign-born big men playing in the NBA. He’s not a rim-guarder like Tyson Chandler but he has proven his serviceability on defense. This Canadian team will rely on Olynyk more for his scoring than defense as the other two 7-footers on the possible-roster are simply defensive additions for the sake of rotation. Dwight Powell has shown some decent potential. I like his size. I like how he played at Stanford. He’ll learn a lot this year with Dallas that will hopefully help him make a strong contribution to the Canadian team.

Even though Sacre makes a very minimal contribution to the Lakers and Bachynski is not even in the league, these offseason opportunities give these kinds of players the chance to really prove what their capable of and maybe relive some of their old college glory. It’s my hope that they step up to the high level of competition and play at the maximum that their talent levels afford. If they do that then Canada will have gotten all they need out of these two. As far as additional big men go, I could easily substitute Andrew Nicholson for Bachynski here but he’s been in the dog house and I worry his confidence may be shot. Plus, he’s a full five inches shorter than Bachynski, however, his athleticism and length could quite possibly make up for the height differential. With him being a former stud-college player and then falling into the dog house after a very solid rookie year, I just worried about how Nicholson would perceive his role on this roster. Bachynski has nothing to lose and should very well know exactly where he fits on this team especially since zone defense is common at the international level. How else are you gonna offset the size, strength, speed, and sheer athleticism of the US team?

There’s also the intriging potential of Kentucky freshman Trey Lyles. At 6’10 and 250 lbs. and one of the top contributors on that deep Wildcat team, he would make another fine young addition, but I’m not sure where Calipari stands or the school for that matter in allowing Nash to potentially add Lyles so again I’m sticking with Bachynski here…but I fully recognize Nicholson and Lyles as the much better talents. Undoubtedly, Lyles will be a big-man mainstay for the Canadian program for years to come; hopefully as early as 2016 but probably beginning in 2018.

Melvin Ejim and Phillip Scrubb are very interesting. Ejim played for a very tough Iowa State team last year that went 28 – 8. Ejim was part of a 3-headed attack alongside DeAndre Kane and Georges Niang that was very difficult to defend by any team in the NCAA let alone other Big 12 squads. He averaged 18 points a game and was the Big 12 player of the year. Unfortunately, he failed to get drafted and didn’t make enough of an impression as a free agent to stick with an NBA roster. He’s a tweener and he plays bigger than his height. He averaged 8 rebounds a game so he can bang the boards with anybody despite being only 6’6. The problem is that at that height, you have to be highly effective on the perimeter. Otherwise you might as well just go to Europe which is exactly where he is right now. I think he makes an interesting pairing with Tristan Thompson at SF and PF when they’re on the floor together. I watched a lot of Iowa St. games last year and Ejim can really play.

Scrubb is currently a senior at Carleton University in the CIS. In case you were unaware, the CIS stands for Canadian Interuniversity Sport and it’s the Canadian equivalent to the NCAA. There’s approximately 47 schools that are in the CIS. Carleton University is the Canadian equivalent to UCLA from the 1960’s and 1970’s. They’ve won 10 out of the last 12 CIS championships and Phillip Scrubb is the 3-time reigning CIS player of the year. The dude can straight-up ball with any kid down in the US. Why he skipped a higher profile position at a Division 1 school is anybody’s guess but here’s a sampling of some of the torchings he’s put on American universities over the last few years.

In 2012, Scrubb dropped 28 on Northeastern. Ok, so what. Northeastern sucks. But then he embarrassed Jay Wright’s Villanova guards for 32 points in a loss. In 2013 against a then 12th ranked Wisconsin Badger team, he threw down 30 points while dishing out 12 assists. That same year he had 14 points and six assists in an overtime loss to a very good Syracuse team. Last year he put up 24 against Illinois-Chicago and then back to back 30 point efforts against Memphis. There is no doubt about this kid’s skills but he continues to fly under the radar because of his choice to stay in Canada.

This year has been a little off for him. He’s only averaging 16 a game for Carleton and the rest of his numbers are a little lower, too. For some reason he’s only playing around 24 minutes per game despite the fact that he’s played in every game except 1 this year. For a back to back to back player of the year, you’d think he’d be clocking at least 32 minutes a game at a minimum as the CIS games consist of 2 twenty-minute halves just like the NCAA. So really I guess his reduced output is a matter of perspective as he’s putting up 16.5 points, 4.5 assists, and 3.5 rebounds despite only playing 24 minutes a game. The CIS 3-point line is the same as FIBA’s which is just a few inches shorter than the NCAA’s. Scrubb shoots 3’s at a 47% clip. He’s gotta stroke and if he plays with as much poise against some of the world’s best as he did against the D1 squads, then I think he’ll make a nice contribution as a 3-point bomber. This is assuming he gets enough minutes to make a solid contribution, again, he is the only non-pro on my preferred Canadian roster.

The Pan-American games are in Canada this summer and it will give the Canadian team a chance to garner some crucial time together against other internationals while in their own backyard. Steve Nash is the GM of this squad and I trust that him and his head coach, Jay Triano, will pair down the roster to the most talented and capable of winning. I think the roster I laid out can take out all comers at the Pan-AM’s. The US usually skips it, so Puerto Rico won the last one. I feel confident that the roster laid out above or one very close to it can easily take out any South American or Caribbean team for the gold as long as Argentina sends its B-squad, which it should. From the Pan-AM’s it will be the final qualifying FIBA tournament in Mexico in the later part of the summer. The two finalists in Mexico will earn a berth to the Olympics, which would be Canada’s first in 16 years.

There are some very big questions to consider here, of course. What if these players that have had a tougher time in the NBA or abroad don’t play up to the talent they displayed in college? What if each individual fails to understand their role within the team and instead jeopardize success by trying to show off what they can do as a tactic in contract negotiation? Team success takes sacrifice and the lack of experience by this squad means this roster is going to need to understand that in a hurry. Most importantly, will Canada ever reverse its stance on insuring its players against injuries when they’re representing the country. Most of the other top FIBA teams do and it would go a long way towards ensuring that the best talent available is able to represent Canadian basketball.

Currently, the Canadian team is ranked 25th in the world by FIBA. After the 2016 Olympics and the World Cup in 2018, I have no doubt this team will be ranked in the top 10. You never know. Depending on how things come together, we may just see this new golden era of Canadian basketball see the team play its way into a top 5 world ranking. Full disclosure, I do have dual citizenship in Canada and the US thanks to my pops, but I was born and raised in the US so you can’t exactly label me a homer. I just really like the potential of Canadian basketball to shake up the FIBA status quo and I look forward to what the future will bring for the team.

You didn’t really think I’d sign off without mentioning any markets, did you? Be sure to maintain a close-eye on 10-year Treasury yields, TLT, XLU, and the US dollar. With the strength of the finish in equity markets this past month, I suspect those 4 categories will tell a very strong story of where equity markets are headed going into the spring. Volatility has really tapered off and there are many indications that the smart money is sniffing something around the corner. Nothing huge, but something none the less. Trade intelligently. Currencies and fixed income are singing a tune worth listening to…and GO CANADA BASKETBALL!

Oil Precedes Gasoline Which Precedes Economic Caution

The oil story has been covered quite extensively this week as oil prices have spiked up and over $105 a barrel for the Texas Sweet stuff. If you’re tired of this story, too bad. It’s important because it just may guide the direction of the market if the trend shifts and set up more opportunities. You may be thinking, “God, doesn’t MarginRich ever write about positive economic topics. It’s always glum, glum, glum!” And that is because I call the markets how I see them. I’m not a perpetual bear; just a trader trying to get a sense for the macroeconomics and speculate accordingly. You want some happy stories? Here’s some YTD returns from some top performing ETF’s. Biotech is absolutely killing it this year and you could have skipped the hassle of cherry picking a winner and bought the iShares Biotech ETF of IBB for a 40% gain since January 1st. Don’t like biotech? How about riding the return of the consumer with the SPYDER Consumer Discretionary ETF of XLY for a 26% gain; or an even safer play was simply riding the demographic wave of the baby boomers into the Healthcare SPYDER offering of XLV, also for a 26% gain. There are positives stories to recognize and quality trades to celebrate, but the problem is that there is always danger lurking around the corner and that is what I’m constantly focused on. I’m forever listening for the sounds of a monster under the bed or hiding in the closet.

Getting back to petroleum…so what are some reasons for the spike in oil? Why even bother with this question? We could falsely attribute any number of causes as if there is a legitimate correlation. Syrian civil war. Egyptian Coup…again. Summertime road travel in the US. Oil tanker train crash in Canada. Full Moon on June 23rd on a Sunday right before the upward ascent in oil began on June 24th combined with planet Mercury turning retrograde on June 26th confirming the petroleum uptrend off of the action of the Full Moon. Those are legitimate astrological events and dates by the way…for real.

Anyways, West Texas Intermediate is spiking and has all but closed the Brent Crude premium. That does not make any sense to my unenlightened brain. America keeps finding more and more oil. There is no shortage of supply, although I know inventories are beginning to track downward. Brent is more difficult to drill and pump out of the North Sea so obviously it should be priced higher, especially when you consider the petroleum demands of the entire European continent. Yes, US demand is picking up for the summer but it’s not as if supplies have fallen off to a point where a $13 jump per barrel in only 3 weeks is warranted. Observe the following charts depicting the changes in US oil production over the years and decades, courtesy of the US Dept. of Energy via the Carpe Diem blog(a lover of America’s energy revolution):

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Doesn’t exactly paint a picture of an environment in which oil should be spiking. The supply & demand fundamentals simply don’t jive. America is essentially swimming in black gold and speculators have ran up the price. I know, I know. Evil speculators are always getting blamed when energy prices rise, but this time it really does appear to simply be a matter of speculators hopping on the trend and running up the price. Fortunately, the Commitment of Traders (“CoT”) reports for oil are potentially foretelling of a turn in the price and possibly erasing the returns of this latest run-up. Take a look at the CoT for the Large Speculators and what it has meant for the oil price each time the Large Specs. crossed the top red line of the envelope, which is denoted by the blue bars in the first chart. The chart below it shows the action at a closer level.

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It would appear that some relief from the high oil prices may be on the horizon, although anything is possible in today’s markets. We know they’re all rigged. Energy is especially important because it truly has the power to bring down the national economic fundamentals quite easily. Even if oil prices do come down, gasoline prices tend to have a 30-day lag so we may still have to deal with a spike at the pump as inventories get worked off. And if oil prices stay elevated, then forget about it. Oil prices staying elevated for an extended period has the strong potential to lead to a total stock market contraction, which can adversely affect several asset classes across debt and commodities. The last thing the nation can afford right now is a $4.00/gallon national average at the gas pumps. You can see the 30-day lag in action in these two sets of charts. The first is courtesy of ZeroHedge and the second is courtesy of AAA, yeah the driving club, which tracks gasoline prices closely and their chart very clearly marks the lag as well.

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The reason this is so important is because the economy really appears fragile right now. There’s no true strength. Sure there are pockets of growth and the stock market has had a great run. And if you go by all the tried and true indicators via the government and some universities, then America is definitively growing. The dollar too has been relatively strong. But nothing is at it seems. If things are truly looking up, then why do the following two charts even exist? The first chart, courtesy of ShadowStats, clarifies the true economic “expansion” of the US since the downturn. I call that “expansion” for what it is…a bunch of bologna. The second chart, courtesy of ZeroHedge again, depicts corporate profits of the S&P 500 and the absolute zero effect it has had on employment. Many of the profit gains have come from these major corporations downsizing and reorganizing, squeezing more profitability out of the labor force that remains. CapEx has fallen off the face of the earth. No corporation wants to risk investing in large-scale growth initiatives(there are of course exceptions) because they can see the writing on the wall just easily as the next economist or speculator or two-bit blogger who thinks he or she knows something. Judgment day is coming. Financial profits represent the largest component of that profitability of the S&P 500 and we’ve all seen the banks cut jobs by thousands at a clip over the last few years. Additionally, those hack institutions wouldn’t even be reporting profits if it wasn’t for the reserve releases they keep drumming up on their quarterlies. The banks are flush with free cash courtesy of the Fed to reserve against their ridiculous amounts of liabilities on and off the balance sheets, and these clown fish release the reserves every quarter to drive the bonuses of the top players. What a racket!

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There is of course the recent bright spots of reported “job growth” in America, which is completely laughable. Non-farm payrolls increasing due to an increase in part-time burger flipping and serving jobs ain’t legitimate job growth by any measure for any enlightened person. What a complete manipulation of the data to produce propaganda to make the great unwashed feel better about employment. A cursory glance behind the curtain shows exactly what is going on with the job market. People who used to possess full-time professional positions that have given up looking for full-time work and simply work 1, 2, or even 3 part-time jobs now, will tell you that it’s not really getting better out there. And more importantly, they can’t afford $4.00/gallon to drive to their jobs taking orders at Fast Food, Inc. during the day and Sell You Crap Corp. at night to stock the shelves. Observe the following two charts. One, courtesy of Eric Pomboy via KWN , which shows the Full-time work force as a percentage of the total US labor force. One word…laughable. You’ll find that word comes to my mind quite often regarding US economics, world banking, and government reported info. The second chart, from Doug Short, supports the sad state of the rise of the part-timer; which is what our government claims is the rise in NFP’s. Short’s site is terrific, so stop by for some very interesting visuals.

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In regards to employment and entitlements and just what is the true bottom line in America. I’ll show one more graph to paint the most laughable picture of all. The following charts depicts the true status of the entitled. Are there hard luck cases that need help? Of course. I’m not without sympathy for the plight of the less fortunate. The problem is that I’m burned by all the lazy schmucks that simply game the system and freeload off of the hard fought efforts of the working class we just talked extensively about in the previous paragraph and showed in the preceding charts. Anyways, courtesy of ZeroHedge:

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Coming full circle, oil prices have the potential to push the economy to contract at a time when the US or the world for that matter can least afford it. I suspect that a turn downwards is coming for the price of oil, but nobody can predict definitively. Do I have a trade for the reader to capitalize on the potential moves in oil, gasoline, or the markets? Nope. I have trades set-up for myself, but this note is to specifically point out the dynamics in the oil market and the very plausible reactions that could occur. If you have some favorite oil related names on a watch list, I would keep a close eye. A take-down in oil may present a very favorable entry point which could generate a nice pop for the year as I still think the equities markets finish out 2013 fairly strongly.

Read, Read, and Read some more.  Good luck out there.