The US Oil Slick is Getting Wider: Oil Boom Going Bust
Only about a week ago, one reader scoffed at me because oil prices had stabilized (or so the market theory d’jour went). The big stock market crash I had predicted had run its course, he thought. The Saudis and Russia had entered a deal on oil, and Iran was coming on board; the stock market was back up as a result. Everything was normalizing again. Whew! He could write off the doom-and-gloomers.
It was a wet, oily dream — a dream I listened to with detached amusement as oil prices and stock prices rose to support his hopes. How silly, I thought, that these investors all hear exactly what they want to hear. What a bunch of lemmings.
Here is what they should have heard as I would have written the news last week:
The Saudis and Russians agreed this week not to reduce production of oil for months to come but to freeze in place the current high production rates that are crippling the US fracking industry. They also conditioned their freeze at these high production rates on all other suppliers keeping their production rates frozen. In so doing, the Saudis and Russians implied that, if others like the US continue to boost production, they will, too. The price war continues full force.
Iran this week said it might become a party to this deal after it gets its own production rates up to the market share it enjoyed before sanctions. For now it is concentrating on boosting production and sales back to that old level.
That was the upshot of all parties agreeing “to talk.” The real news was clear for anyone with ears to hear if people would just start to listen to things they don’t want to hear: No one is budging. Oil producers are going to keep pumping supplies up at the same high rate for as far as the eye can see, and Iran is going to continue to ramp up production until it gets back to where it was in its pre-sanction days.
There was no good news there at all — not a drop — but people lapped it up as if there was because that’s what they wanted to believe. It’s strange to see so many people crowded around pools of spilled oil surplus, lapping it all up like it tastes good.
The resulting rise last week in speculative oil pricing was beyond silly. The stabilization of the stock market based on seeing oil prices rise shows that investors are running on the thin fumes of mere wishes now. Their heads are filled with carbon monoxide so that they think through a sleepy fog. They bobble like balloons with every little wind of change that blows.
This week, however, we see reality sinking back in as their heads clear a little to see that everything continues exactly as it did before the Arabs and the Russians got together. That, of course, is exactly how I have been saying it is going to continue.
Let’s get down to it: We’re in an oil boom bust
Saudi how to buy zolpidem online Arabia’s oil minister says production cuts to boost oil prices won’t work, and that instead the market should be allowed to work even if that forces some operators out of business…. (NewsMax)
You see that? “Production cuts won’t work” means “they’re not going to happen!” So get over it, investors. You’re dreaming of blue skies that are far, far, far away. I don’t see blue. I see seemingly endless fountains of oil, clouding the desert skies for months to come until the spine of the fracking industry in the US lies broken and quivering on the sand with the vultures picking at its meat.
That’s the reality of the US oil industry right now … if you’re willing to step outside of economic denial and see things as they are.
“The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate,” Naimi said. “It sounds harsh, and unfortunately it is, but it is the more efficient way to rebalance markets.”
He means fracking companies in the US, which have a high cost of production compared to the cheap Saudi costs of extraction, are going to have to buck up. They can either keep borrowing more cash until they and their banks die from bad loans or just liquidate now. Saudi Arabia’s oil minister admits that sounds tough, and it is tough. What he’s saying, in other words, is, “This is capitalism, so GET USED TO IT! The problem will only be solved when the weak perish! We’re not cutting production in order to help them survive. This problem of oversupply will be settled by the high-cost frackers liquidating. That is the efficient capitalist way.”
And he’s right, but we live in a world that doesn’t understand economics anymore. They think things should happen the way they want them to. The US stock market and the oil speculators last week forgot all about how ruthlessly capitalism works when it corrects speculative boom cycles. The Saudis quite simply are not about to keep trimming back their market share just to help us get richer at their expense. They can produce oil a lot more cheaply than the booming US fracking industry can, so they are going to keep on pumping and drive the US fracking industry largely out of business.
Anybody who believed anything else for one second just was not thinking. Those weren’t sparks of thought that brought the market up. They were just short circuits — brains fried from things that don’t compute after years and years of free Fed money.
Naimi disputed a common view in the industry: that Saudi Arabia has kept pumping oil to protect its market share and undercut shale producers. “We have not declared war on shale or on production from any given country or company,” he said.
He may be a little disingenuous there, but what he’s saying is, “We’re not targeting anyone because of who they are or whether they frack.” The Saudis are, however, protecting market share. They’re just not specifically targeting frackers or the US because they’d love to see Iran crippled, too. What they are targeting is their share of the market and saying, “We’re going to keep producing this amount of oil to fill this share, come hell or high oil supplies, and whoever that takes out … that’s their tough luck. It might be harsh, but that’s the way this is going down!”
And that’s how everyone should have understood the Russian and Saudi agreement in the first place. It’s how I immediately understood it. It’s what I said would happen even before they met. All they really said is that they are not going to expand to try for an even larger share … so long as no one else does.
Why OPEC is taking down the US oil boom
The OPEC rationale is simple. Back in the days when OPEC countries were the main players on the oil sands, they could all agree to cut back production in equal proportions in order to raise oil prices. Now that the US is producing as much oil as Saudi Arabia and is continually increasing its production, any cutback by OPEC is a low spot in the market that US oil just flows right into.
Every time OPEC would cut back in order to increase prices, the US would increase its market share by just continuing to ramp up more production. The USÂ did not, in other words, ever participate in the cutbacks. It just sucked up the slack created whenever the Saudis pulled back on production.
The Saudis saw where that was going and essentially said, “That’s the end of that. We’re not cutting back at all anymore more — not this year, not next. We’re going back to the production we were at and will let normal market dynamics solve the oil supply glut. So, may the best nation win.” Thus, as the oil minister continued to say,
Cutting low-cost production to subsidize higher-cost supplies only delays an inevitable reckoning.
Give up your oil pipe dreams, America, that make you think the Saudis are ever going to trim back production. “The way production will be trimmed,” they are plainly saying, “is by others whose costs are higher going out of business! It’s an inevitable day of reckoning because those with much higher costs will over time certainly be the ones to die out.
The Saudi oil minister concluded that this is just another inevitable oil boom-and-bust cycle. The boom is over; the bust is here. So, don’t even ratchet up your glee a tiny bit just because the Saudis and Russians have agreed not to increase production further so long as no one else does. That only means, they’re not going to make things worse than already are, but they are not going to flex an inch to make anything better either. So get ready for a long, hard ride. This is a war of attrition, and the people with bigger mouths to feed will be the first to die. That is the US fracking companies, starting with the smaller, less diverse companies.
As this news was finally digested, we saw oil prices plummet again this week. Anyone who entered bids in the stock market based on the notion that oil prices had risen and would stabilize a little higher was a wishful thinker. Reality is a harsh task master.
As the real meaning of the Saudi-Russian agreement sank in, oil prices went right back down into the tar pit. I’ve said consistently that is where oil prices are staying for awhile. In fact, with Iran’s production coming on, they are bound to go even lower. And then, when all the tanks in the world are full, crude prices could really go bust because who wants to buy any oil for immediate delivery when they have nowhere to put it? The only boom left is kaboom!
So, give up on the idea that oil prices are going to improve. It’s a Keystone pipe dream that isn’t going to happen. When the market goes up on such news, it just shows how far from reality market thinking is and how desperate for hints of favorable economic news. Those who believe it, wind up looking silly … and poor.
[amazon_link id=”0996489703″ target=”_blank” ]Shale Boom, Shale Bust: The Myth of Saudi America  In 2014, something went terribly wrong with this rosy scenario of “Saudi America.†An unexpected collapse in the price of oil is bankrupting the oil patch, destroying jobs and threatening plans for a renewable energy future.[/amazon_link]
![Dorothea Lange [Public domain], via Wikimedia Commons](https://i0.wp.com/thegreatrecession.info/blog/wp-content/uploads/Bakersfield_California-300x226.jpg?resize=300%2C226)
Boom towns go bust. Bakersfield, California. Tents and shacks for 40 families. Note house built of discarded oil derrick lumber.
The oil bust is here to stay, so glub, glub.
“It’s just another boom-and-bust cycle.” As a result, here is where we stand today:
“Biggest Wave Yet of US Oil Defaults Looms as Bust Intensifies”
In less than a month, the U.S. oil bust could claim two of its biggest victims yet.
Energy XXI Ltd. and SandRidge Energy Inc., oil and gas drillers with a combined $7.6 billion of debt, didn’t pay interest on their bonds last week. They have until the middle of next month to either pay the interest, work out a deal with their creditors or face a default that could tip them into bankruptcy.
If the two companies fail in March, it would be the biggest cluster of oil and gas defaults in a month since energy prices plunged in early 2015.
“We’re just beginning to see how bad 2016 is going to be.”
Indeed, we are. 2015 was just the beginning as the weakest were quick to fall. Now we move outward to the next tier that is starting to crumble around the fringe of the oil pit.
The U.S. shale boom was fueled by junk debt. Companies spent more on drilling than they earned selling oil and gas, plugging the difference with other peoples’ money. Drillers piled up a staggering $237 billion of borrowings at the end of September.
There were lots of other people willing to speculate on unprofitable businesses. Sound familiar. It was the dot-com boom, only in oil. Those days are over. No one wants to issue that high-yield debt now that they know the boom has gone bust and that the Saudis and Russians are in this for the long haul. The cost of junk credit for oil companies has skyrocketed, and its not about to come down, so the frequency and size of oil and gas company crashes will get greater all through the year. Accept that reality.
The banks that are owed money on the loans mentioned above include the Royal Bank of Scotland and the huge Swiss bank, UBS, the UK’s Barclays, the Royal Bank of Canada, and a large French multi-national bank. You see, the damage extends fully beyond the US, and that’s the way it will be with all of these greasy junk bonds.
There will be bank failures because of this. The only question that remains is which of these banks is weak enough and involved enough in the US shale patch to be the first to collapse because of the oil bust along with other problems?
It’s a time bomb.
The number of all US companies that are nearing default has reached a peak not matched since the worst peak of the Great Recession. (There that comparison is again. It’s inescapable now.) That means across all industries, but oil and gas companies are leading the pack.
We are just seeing the beginning of the second set of waves come onshore now. So, hold onto your body boards and get ready to plunge into the onshore oil slick because we’re going to take a pounding.
Fracking up is hard to do.
[amazon_image id=”B00CMDPTA4″ link=”true” target=”_blank” size=”medium” ]The Prize – An Epic Quest for Oil; Money & Power[/amazon_image][amazon_image id=”B004S95I4M” link=”true” target=”_blank” size=”medium” ]Blood and Oil – The Middle East in World War I[/amazon_image][amazon_image id=”B00HKKX2L2″ link=”true” target=”_blank” size=”medium” ]Oil: Black Gold[/amazon_image][amazon_image id=”B01A7OLKHK” link=”true” target=”_blank” size=”medium” ]Frack Us[/amazon_image][amazon_image id=”B0037VY1ZO” link=”true” target=”_blank” size=”medium” ]Crude Independence[/amazon_image][amazon_image id=”B00DY2T6BA” link=”true” target=”_blank” size=”medium” ]Split Estate[/amazon_image]
Tuesday, March 1st 2016 at 11:08 am |
For the record: DJIA up 318 at 19:07 March 1st 2016. No comment, just a fact.
Tuesday, March 1st 2016 at 11:36 am |
Stocks are looking pretty good, Davebee, looking like they could break past their next point of major resistance … or not. Right now, teetering on the verge. Thanks for keeping us updated. If the market closes above that point, things might start to look a little more hopeful for you (in terms of charts but not in terms of fundamentals). If, on the other hand, it turns back down, it’ll show that it banged its head on the ceiling and refused to do better.
I fully expected a large bounce and roughly with this timing, as that is how bear markets always work. They give false hope to fools who follow them all the way down for that reason. I won’t waste any time feeling sorry for them when they are out of money, as they’ve had ample warning and plenty of visible reasons to get out.
I will say that the bounce is a little higher and longer than I thought it would be, but the Dow’s surge today is due to silly oil-price gains that happened because a pipeline was cut off from production in the Iraq war. That has raised hopes that turmoil in the region will slow down production.
I’m just about to write my next article on the peril for oil prices as the oil surplus reaches a new nasty inflection point that will make the surplus worse. War, of course, does have the capacity to end all bets on that, but I don’t think it will. It’s not a flimsy price point on the charts but based on serious fundamental problems. Unless war does a lot more than take out one pipeline, which gave more hope of price increases than the pipeline, itself merits, oil is poised to take a serious misstep for the worst.
Ultimately, it doesn’t matter. I doubt very much the market will break out into a rally. So far, it’s still a LONG ways from recovering this year’s losses, and there is a lot of bad news building all around the economy. So, while the bounce is a little stronger than I thought it might be, it could end today and turn out to be a flash in the pan. And it’s not much brighter than I thought it would be. What matters now is if it can hold its head up there or if it just tumbles back down as soon as Trump takes the Super Tuesday vote. (Wall St. hates Trump because he doesn’t care about taking care of the banksters or pumping the market up with hot-air fiat money.)
If the market goes down again this week, you’ll look awfully funny bumping your head off the ceiling so deliberately. I’m willing to throw a buck on the table to watch you do it. Let’s make it US$10 just for fun. If the market closes the week with the Dow above 17,000, you mail me a check designated in US dollars. If it closes going back down below today’s high point, I mail you $10 US. Anything in between that tiny spread is too close to call. You up for it?
I think you’re going to end the week with a sore head and $10 poorer, but the market is showing a slight bit more resilience than I anticipated, so I think you could have a 50/50 chance for the week but a very dim chance longer term.
You might want to wait until my next oil article, though, before you set yourself up to possibly look foolish. See what you’re betting against. (But war is a wildcard that can change everything drastically with the price of oil.)
–David
Tuesday, March 1st 2016 at 1:01 pm |
Dave, I think you got your bet backwards. Dow goes up, he pays?
Tuesday, March 1st 2016 at 2:31 pm |
Thanks. You’re right that I wrote it backwards, so I went back and changed it.
Tuesday, March 1st 2016 at 2:51 pm |
I’m dyslexic, too. Or something. :o)
Tuesday, March 1st 2016 at 12:19 pm |
Read this about the coming global collapse, from Mervyn King, former governor of the Bank of England:
http://www.nytimes.com/2016/03/01/business/dealbook/brexit-vote-and-donald-trumps-surge-reflect-discontent.html
King’s new book, out in 3 weeks, is called “The End of Alchemy: Money, Banking and the Future of the Global Economy.â€
Tuesday, March 1st 2016 at 12:46 pm |
Thanks.
Here’s a link to the book, too:
The End of Alchemy: Money, Banking, and the Future of the Global Economy
Tuesday, March 1st 2016 at 8:18 pm |
Yes Delving I have heard about Mr. King’s book plus I have also been hearing a myriad of predictions about how industrialized civilization will come to a grinding halt since before 2008 yet we are all still here posting about the supposed collapse day after day.
We were supposed to be running out of oil, then it was global warming that would see us off, then it was the coming war between the USA and Iran/Russia/China/North Korea..fill in the blanks yourself and on and on.
Yet each 24 hours sees the planet still in its orbit and billions are still trudging off to their badly paid jobs and still diligently paying off their mortgages and insurances of various varieties, thankfully.
My conclusion? Humans are extremely tenacious and remarkably adaptable therefore don’t write ’em off just yet no matter what Mervyn King has to say. Anyway Mr. King like all 7 billion of us is stuck on this rock so we’d better make the best of it coz nobody gets out of here alive to paraphrase a certain rock group and the late Mr. Keyenes
Tuesday, March 1st 2016 at 11:40 pm |
Ah, but if you had been following me, you would have heard a different set of events AND things that were NOT going to happen.
You would have heard at the end of 2007 that the housing market was going to crash in a few months and that the crash would be so bad it would destroy major banks and would become global in scale.
When that started in mid 2008, you would have heard that it would fully effect the US before going global so that there would be delay in how it hit Europe and other regions, but eventually it would take nearly everyone down.
When the Federal Reserve came up with quantitative easing and started dropping to lower interest rates, you would have heard that that was never going to bring a lasting recovery because without massive fiscal reform by the federal government, all we were doing was pushing the snow straight ahead until the load would get to big and the plow get stuck. When lowering interest didn’t work, you would have heard with the announcement of QE that as soon as QE ended, the economy would turn upside down again, and Federal reserve would have to start QE again. Then you would have seen that happen.
You would have heard that it would all go down again when QE2 ended and that the Federal Reserve would be forced to start QE3. And you would have seen that happen. You would have heard that each round of QE would have to get bigger because the effectiveness would grow less each time due to the law of diminishing returns.
In July of 2011, I predicted the US credit rating would be downgraded for the first time in history in August of 2011 due to Republican brinksmanship “even though the Republicans will not take us over the brink of not maintaining our debt.” When that happened, I said the stock market would fall hard, and it did. It took the immediate promise of the most massive round of QE yet (QE3) to stabilize it.
That fall, after things stabilized again, you would have heard me say that I anticipated nothing would happen for a year and a half (all of 201 and most of 2013), but a gradual rise due to the very long (indefinite) promised mostly massive doses of QE. There would be no great recovery in terms of business profits or jobs, just an endless mirage that would look like it was picking up steam but then not go anywhere; but the stock market would keep rising because of QE inflating it. I predicted there would be NO US stock market crashes during that time and said, therefore, I was going to take a hiatus from writing for a year or two, as there would be nothing interesting to write about, and you would have seen that I did exactly that.
When i came back in the spring of 2014, you would have heard me say many times that the federal reserve, which had announced already that it would end QE3 in the fall, would be very reluctant to start QE4 because it would be admission that QE was never going to work. Therefore, you’d see the stock market crash with the end of QE3 in the fall of 2014 and stay defunct. it would not recover.
While some wouldn’t call what happened a crash because the market only plunge 105 and did not stay down, many market bulls call it the “flash crash” of October 2014. The reason I call it a crash is because the end of QE3 completely killed a six-year bull market. The US stock market bounced violently along a ceiling sideways after that fall for an entire year in 2015 and ended the year 2015 slightly down from where it started the year. Many investors referred to all of 2015 as a “horrible year for stocks,” so certainly a far cry from the bull market of pervious years.
You would have heard me predict that the global economy would show evident signs of collapse everywhere by the fall of 2015 with nations sliding back into recession and that the US stock market would crash in the fall. While some said the Fed wouldn’t dare raise interest rates, I predicted it definitely would raise them on December 16, 2015, and said the stock market would immediately crash (that still being fall), BUT I said it would crash by going up for a few days. Then it would round off, and then within a very short time go over a cliff, which it did as soon as the holidays ended and January hit — the worst January in US stock market history.
I said that the crash would take an entire year and a half to play out (that it would not all happen in one month) and there would be bounces up along the way that people would think were rallies back to a bull market, but they’d be “bear-market rallies” that would fail to take another plunge to an even lower point. During those rallies I said some would get all excited that the market was going up and say, “See the big crash isn’t happening.”
Yep, I actually said all of that, which is why i say this rally looks pretty close to what I expected.
Some predicted that, if the market fell, the Fed would immediately prop it up with QE4 or negative interest rates. I said the Fed would be very slow to do that so that, by the time it finally does something like that, it will be too little, too late. It may never do QE4, but it may try negative interest rates. I think we are seeing, however, that negative interest rates have backfired wherever they have been tried, so the Fed may be reluctant to do that, too.
That’s it in a nutshell. I never predicted a year of collapse prior to what I said would happen in 2008, and there were two years during this long rubbish heap of a “recovery” where I said things would perk along in a mediocre manner in terms of business profits and jobs but in a stellar manner in the stock market for nearly two years, and they did.
Which means I’ve never been a permabear. The stock market downturns always happened exactly when I said they would but were not as severe as I said they would be, though two were not as major in size as I indicated they would be, and yet they were still quit significant in impact — one requiring the most massive new round of indefinitely long QE in the history of the world up to that time to get it to bounce back, and the next one killing for good a bull market in the fall of 2014. The present one happened to the day again in timing, but we have a year and half to see if it goes as low as I said it would because I have always said that something this size will take a long time to play out — like an ongoing train wreck.
Can’t help the fact that I didn’t predict a quick crash to the bottom. It never was going to be that kind of thing. I have to predict what’s going to happen, not what is easy to set a mile marker and say (by this date you’ll know if I was right or wrong). I did with all the other events, but this time is much different, and the bad news is a long, long train wreck.
If I’m right, it will be the fifth time in a row, plus there are the two years when I said it would not crash, and it didn’t. Along the way, I’ve made some missteps on minor predictions, but not on any of the major turns and not in predicting any stock market crashes or major drops or trouble-free periods nor ever in the general direction that things would be headed in particular parts of particular years.
So, hang on the for the ride, my friend, it’s going to be long and thrilling with a few calm spots along the way … as every major bear market in history has had its rests and its upticks. And, while you’re at it, place a bet. It’s more fun if I’m making a little money on the side and have a little skin in the game, even if its just a token amount.
As for global warming, I think global cooling may be the greater risk. The longterm trend is that the planet is warming due to atmosphere change, but the midterm trend is that the sun is cooling significantly as it goes into a long solar-minimum cycle. This cycles can last from a few decades to a few hundred years, and they are more powerful than the warming effect of atmospheric gases that we have. We may be GLAD for the warming effect of atmosphere gases. HOWEVER, if we don’t get those gases under control, the earth will get very hot when we go back to solar maximum. That may be a long, long time off unless this turns out to be a short (as in 20-30 year) solar minimum.
–David
Sunday, February 28th 2016 at 4:20 pm |
Wow what a bunch of real smart oil talk!Well me and my lower middle class friends are just glad to see gasoline at less than $2 a gallon so maybe we can take our grand babies to Six Flags next summer….
Thursday, February 25th 2016 at 11:42 pm |
You are probably going to get sick of me agreeing with you, but once again I do! Here in Scotland the North Sea oil industry is getting whacked. Jobs in the oil industry are being lost every week and oil exploration and development in the North Sea is being cut from an average of £8 billion per year to now £1billion. The up tick in the oil price is exactly as you describe, suckers buying into the market due to a production freeze which is totally different to a production cut. Also the freeze happens to be at a time when out put is at its strongest anyway due to the Western Hemisphere being in winter (so consuming much more than during the summer months). No way is Iran (after years of sanctions) going to cut back production when they only just got the green light to get started again! All your observations on the US fracking oil industry are completely spot on (the same goes for Canada). Lastly, what all these stock market worshippers forget is that the PPT keep trying to goose oil up. People down in the real world are struggling more and more financially so even if the PPT and oil pundits manage to get prices up, Main St. will cut down usage and with this on going global economic contraction, industry isn’t going to be using more oil any time soon.
Friday, February 26th 2016 at 6:29 am |
Ah, you’re up in beautiful Scotland. Thanks for giving us a perspective from up north. I hear a lot about what is happening in America’s shale region, but rarely here about what is happening with BP and others up there by the North Sea. Oil being a global market is being hurt everywhere, and the pain is very far from over.
Thursday, February 25th 2016 at 10:57 pm |
About that declining stock market meme….Thurs Feb 25 2016 Dow closed up 212 points in the green.
Early today 2016-02-26 at 03h00 GMT, Dow futures were up about 19 points to the green.
They just aint alisten’n to ya Davey.
Thursday, February 25th 2016 at 11:51 pm |
That is cos of manic PPT intervention since the markets slumped big time on 12 February, along with Team Greed in Wall St and the City of London not having to worry about another piddly little rate hike from the Fed. and in fact hoping for NIRP down the line and maybe another big round of free money (QE). Also China just came out and intimated they are going into, ‘ease’ mode rather than do another currency devaluation. These high stock valuations are all based on free money courtesy of Central Banks and big corp. Buy Backs. Just about none of their valuations reflect our sinking economies. All these stock market bubbles keep doing is making the already super rich in banking and industry even more rich. At the end of the day every major nation is being asset stripped by a bunch of unelected gangsters who in every shape and form are no different to a mafia (they are just killing us slowly rather than by firing a gun at our heads).
Friday, February 26th 2016 at 1:33 am |
Well then I strongly suggest we had best take that offer we can’t refuse from the financial mafia as their scheme seems to be the only one showing a profit right now.
In short, those playing safe and staying in cash are steadily losing more and more by the day and should the NIRP nightmare ever come true then those unfortunates still in cash are gonna be T O A S T and in a very big way too.
Friday, February 26th 2016 at 6:39 am |
Gee, I don’t know Davebee. I followed my own advice last summer and took all my money out of stocks and put it into US bonds and money-market accounts. The result is that I am a meager 3% higher than I was in August, but I would be 10% lower if I had taken your advice here and staid in stocks. I also would have had a frantic ride of months. Instead, my ride has been smooth as silk. I sleep peacefully at night, knowing my money is secure for the time being and that I don’t have a care in the world about what the stock market does at all. I can watch it with total amusement from the sidelines as it bounces erratically, falls off cliffs, struggles unsuccessfully to recover and then bounces erratically some more. And I just watch and say, “Silly, silly people, taking that rocky road when you could be over here on the silk-smooth path taking a nice gradual climb upward.” The view up here is nice and improving by the day. The road is smooth and the air is calm. You can have the little trip through Hell’s Canyon down there if you want it, but it’s gorgeous up here, and the view stretches for miles of clear-blue sky.
Monday, February 29th 2016 at 8:11 pm |
He is a Troll (I am starting to like that word!). Don’t waste your vastly superior knowledge and writing skills on someone who is so evidently not interested in genuine debate concerning your articles. For myself, I eagerly await your next one. I also really appreciate the pictorial content of your articles, both humorous and poignant (it shows again, your extremely sophisticated mind).
Monday, February 29th 2016 at 8:04 pm |
A friend of mine in the US explained to me recently what a, ‘Troll’ is. Looking at the responses you make on here I see that you fulfil the definition of, ‘Troll’ perfectly.
Monday, February 29th 2016 at 8:08 pm |
Gee thanks for the compliment, it’s good to know I have friends in far away places. Tell your ‘friend’ to keep taking notes if you like.
Monday, February 29th 2016 at 8:34 pm |
Well you are either a Troll or an idiot (probably both). Europe is bankrupt, its zombie banks kept alive on €billions of QE courtesy of the ECB every month (and is falling apart due to an on going refugee/economic migrant crisis that is causing increasing friction between Germany and the Balkan countries). China has surging debt problems, Russia is in recession, the US has the biggest debt in history, etc etc etc. Against all of this you bang on about some dead cat bounce in the stock market as a reason to trash years of study and research by the author of this article. You are a Troll and what ever garbage you write in reply to me or anyone else, I won’t waste my time responding.
Monday, February 29th 2016 at 8:49 pm |
So I should cash in my local fully invested pension scheme and go over to crappy EM, South African Rands currently on the money market at R16-00 to one US dollar?
Please advise.
Soonest!
Monday, February 29th 2016 at 9:22 pm |
You’re in South Africa. Nothing I said about the US stock market even applies to you, Silly — unless you’re saying your pension is invested in US stocks. In which case, you’ve already lost a lot of money since last August and especially since January 1, 2016.
Friday, February 26th 2016 at 6:13 am |
I can blow smoke for years but then I would get cancer!
Friday, February 26th 2016 at 6:31 am |
My English is pretty good but I simply cannot get the essence of what you are trying to convey with your reply.
Please explain further, is it anger or satire? Thanks.
Friday, February 26th 2016 at 10:43 am |
The stock market is just smoke and mirrors.
Eventually it will die
Hope that helps
Sorry it went over your head
Friday, February 26th 2016 at 6:27 am |
Davebee, I didn’t think you would want to out yourself like that. Let’s see, my prediction was that the Fed would definitely raise its interest-rate target on December 16th, the stock market would go up right after the Fed raised rates, then turn down, then fall off a cliff and that there would be several cliffs on the way down with bounces up along the way — not just one clean slide to the bottom — and that the whole fall would take a year to a year-and-a-half to find its absolute bottom.
The Fed raised rates on the 16th, the stock market immediately shot up; it fell briefly, tried to bounce up again and then started a long decent. Come January, it fell of its first cliff, plunging for two weeks straight, then it made its first bounce. The Dow is currently 2,000 points off of its Dec. 16 high and has been bouncing erratically sideways through all of February.
I’d say my predictions could not have been more spot on the entire time. The first leg of the long fall is now behind us, the market is now taking its breath and consolidating a little, as I said it would, and getting ready for its next big plunge over the second cliff (which simply remains to be seen).
On the other hand, so far you’ve been right on nothing, because you’ve said the market will return to being a bull market, but it hasn’t. It’s still WAY down for the year. You’re betting that February’s bouncing around will turn into a recovery and finally prove me wrong, but so far it hasn’t; and every time you brag like you did today that the market is recovering, the market refuses to cooperate with your bullish claims and turns around the next day to prove you wrong.
Meanwhile, almost everyone out there in the analysis world now refers to the market as a bear market, even though it isn’t down 20% yet. I’ve heard no one in the press saying that it is still a bull market. That much has finally gotten through their thick heads. Citi came out yesterday and said it looks like the US economy is going into recession after all.
The other part of what I predicted was that the entire planet would be in a state of economic collapse by last fall. I said that in the spring when people were still talking about recovery. Now almost everyone agrees that the global economy is a disaster everywhere — China, Japan, much of Europe, Canada, all of South America, but especially Brazil, and finally (last to join as I said it would be), it looks like the US is sliding into the pit, too (according to Citi, who is usually bullish).
So, I’m feeling quite comfortable with how the entire world has listened to me, Davebee. I resisted in my article outing you by name, but you chose to out yourself. Please do stay with us, though, because you help illustrate the points I was talking about in the article above, and I gotta love ya for that.
–David
Friday, February 26th 2016 at 7:13 am |
I’m here in South Africa where we change Finance Minister’s like the Americans change their socks.
My local stock market, the JSE just closed up a good 2% today (15:00GMT) and the DJIA is also well up at 15:00GMT Feb26 2016.
Local investors are thinking that China could well be getting a second wind and will therefore be buying more of our excellent platinum/coal/gold/iron ore exports.
The latest Finance Minister (actually he’s been in the job before) just unveiled the new 2016/17 budget FEB 24th and did NOT increase VAT so that has also made a lot of happy campers here on the JSE.
All in all a good week was had by all.
Oh yes, nearly forgot, during this week, to keep our culture strong and vibrant ( I think that’s the buzz word) we burnt down a large 3 storey admin building at a university in North West Province and torched a couple of attending cop cars but that’s all in a day’s fun and games out here I guess.
Friday, February 26th 2016 at 7:32 am |
Well, I’m not talking South Africa, am I? And I never have been. I’ve always been clear that I’m talking about a US stock market crash. I’ve said almost nothing about SA the entire 4+ years that I’ve been writing about the global economic collapse. I don’t talk about it because I don’t really know what makes SA tick.
I have no reason to think a big oil boom / bust cycle will have the same impact in SA that it has here in the US where oil was THE driving force of jobs recovery and now is in deep trouble.
I would not, if I were you, hold my breath on a Chinese recovery. China’s worst days are still ahead. I think they may panic and do some major stimulus spending (building a few more bridges to nowhere and maybe trying to build a new ghost town) only because they have nowhere to go but down right now. They don’t WANT to reverse course like that, but things are looking quite desperate for China.
Remember, China is one of the most economically opaque nations on earth. We all know the you cannot trust Chinese government statistics at all and that all Chinese businesses have a policy of running a double set of books — one for the government, one for themselves so they know how they are really doing. I will point out that every time people have said China has now put its problems behind it, I’ve said, “You’re crazy. It has not even come close to putting its problems behind it.” And those who have said it has resolved its problems have been wrong every single time.
China has a lot of desperately bad news yet to come; but you may bet a little temporary buying spree out of them as they try a desperate attempt at pushing down the same accelerator that worked for them as they created ghost towns. Problem is, REAL economics says you cannot succeed by building roads to nowhere. That is ultimately unsustainable, and the longer you do it as s temporary fix, the worse your longterm problems become. It’s like digging a grave for yourself in order to remain employed. At the end of each day, you may get paid for your work, but you’re in worse shape than you were at the start of the day, standing far down in your own grave.
–David
Friday, February 26th 2016 at 7:43 am |
Here in the oil slick, news just came out today that oil giant Halliburton is cutting 5,000 jobs to catch up with the downturn. What we’re seeing in the oil boom / bust cycle in the US is that the jobs that were created in fake recovery were mostly a result of the oil boom, which was partly financed by the Fed’s cheap credit. Now that the cheap credit is gone and now that oil prices have gone bust, the jobs that were created are unwinding.
Also, Davebee, those Dow futures that you were so gleeful about this morning, have already lost all of there shine and turned negative. Once again, they’ve turned on you as soon as you made your claims that things are looking rose in the US market. The US stock market is now headed south of the border, and the day is only half done. Where it ends up will depend on what comes out of the emergency meeting of the G20.
If that meeting closes with positive talk of stimulus, there will be the usual knee-jerk move upward because the market breathes the nitrous of stimulus as its drug of choice; but all the stimulus has reached the end of the road. While the market will react reflexively to it, the bottom line is that the stimulus has zero capacity to actually create recovery. Many areas have already had to go into the Neverland of negative interest rates, and all statistics show the results in that upside-down world to be deplorable. It is not the stimulus it was hoped to be because it is bizarre realm in which nothing works properly. It is, in short, stupid. But that doesn’t mean the US stock market won’t take a euphoric bounce up if it gets its promise of good dope.
If the G20 comes out with nothing, March will be off to horrible start.
Even the usually bullish Jim Cramer said today, “When you look beyond the market’s tight linkage to the price of oil, the idea that we could be headed into a recession has become a powerful theme, a whispered undercurrent in this environment.” He asks, regarding the Fed and its move away from stimulus drugs, “Don’t they at least have some buddies who are concerned about a recession? Don’t they know some people are pulling back from investing?”
The market here is in serious contraction, and the pullback has only just gotten underway. The cries for another hit of the big drugs from the Fed are growing desperate and almost whiney because people like Cramer know now that the market has no chance at all of going up without more major hits of Fed free money.
–David