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Why the Stock Market Should Crash

While the US$ printing continues, it will stay a one way bet forcing you to stay in the market to protect your wealth through illusionary growth, that or spend any savings you have on things you do not need. The only way this can end is when China and the ROW stop funding the USA. It will not happen quickly, but it will happen as individuals make their own decisions that cost goods in other currencies and move away from the $ slowly, progressively and surely. No one can afford long term to be caught with cash that they know has no sound basis behind it, but plenty will take the gap in the short term and take their chances - especially if they know their government will bail them out.

Is Dollar Revulsion for Real?

The present US government will only want to devalue the US$ AFTER they have eaten everyone elses lunch for them. All the blustering is about sucking in more of other people's money for as long as possible, before they allow it to be blown to hell, preferably when a 3rd party they can blame (it always has to be someone else's fault) takes the action.
I think the European politicians smell the intent, but are smart enough to try and keep their distance and their independence. Eventually this is going to come down a straight out fight for jobs, and a humdinger of a trade war can only be just round the corner. We are still at the pushing and shoving stage, with a few mannerly thrown fists, just hope we do not get on to knives and guns.

Is There Really a Global 'Cabal' Aiming to Dump the Dollar?

Methinks that most of the US blustering forget that people make these moves, not states. It is the thousands that every day wish to avoid risk and reap reward that will make the decision to move by their collective actions. If the US$ is high risk and highly volatile, and forces any number of painful problems - then a change to something (anything ?) more stable will be prefered. Those thousands will and have already started to test the water - and found the alternatives to hold some better promise, be they Chinese, Arab or anyone else. Political issues will not be able to hold back the power wielded by all those individual decisions. And finally - yes - can I now please be paid in Euro's, I'm not sure I like USD's so much anymore. I'll start with a split package, and then we will see how we go. The scare stories on loss of the USD just make me more convinced its time to hedge the bets - and so my little leak is likely to turn quickly to a flood if the USA is unable or unwilling to get their house in order. The message from the world is simple, stop printing money or we will have to trust something else as a store of value.

Shrinking Market Liquidity, or the Soon to Appear Black Swan of Black Swans

As long as they keep getting paid to take the bets and are covered for the losses, they will keep on betting till they make lots of money to have "profits" they do not have to give back.
If the added liquidity pumps the market, the government program will be seen as a success.
As you rightly point out this is nothing more than a clever scheme backed with tax payers money designed to force you to spend money and/or lose it through inflation. An investment nightmare for "buy and hold" and now a nightmare for traders as well. The game of the last 10 years has to be paid for, and there is no cheap escape, but there will be winners and a lot more losers. I think now the game is up, and unless main street starts showing some benefit - as in real money, real value creation, with real people to offer investors - we are all doomed to paying the price of past follies. Even the trick of getting somebody else to pay is simply not working any more as the "smart" money can smell the manipulation and are simply abandoning the game. Maybe its time to play in 3rd world markets that are not quite so sophisticated, or in physical commodities that are less easy to game.

Earnings Are Horrible, But It May Not Matter

I just read today a claim from the Chinese that they sold more cars last month than the USA or Japan, in fact almost more cars than the USA AND Japan combined. I suppose they are not the same size, value or fuel consumption cars, but they are cars nevertheless. Also imports of coal and iron ore at record levels into China.
I guess that leaves something to be said for saving, making things, and having a government controlled financial system. Seems to me the grand old USA is slowly finding the value of the real economy, rather than the virtual one that is disappearing to nothing. Point is we have all been living off the virtual economy, so it makes for a rough change to realise just how hard it is to make a living without leverage off the cheap manufacturing sweat of others. China seems to be spending its stimulus money on building their real economy and is still adding value. The West seems to be spending printed stimulus money on propping up failing real estate, virtual business, and keeping unproductive people employed in value destroying business. That is what is so difficult to believe in the present gains - you can sense it is the same phoney scam being continued. When we see the value system in the USA change - that will be the solid turn of the market, anything less will be a continuation of the confidence game, where the traders can feed but true long term investors never win.
I am still long on oil (and cash) - but realise it may take a while for any positive return to show in real terms.I just keep on buying in the big OilCo's when its cheap and pray it has to work for me eventually. At some point in time it has to work, either through inflation, or the value of easily traded raw material, or both. One catch-me though - I know just how much capital it is going to take to keep capacity on line - so its not just about reserves, it is about how much money it will take to keep the reserves flowing as well. Not all OilCo's are equal.

Humility of Realism II: Seven Thoughts about Our Whole System

This is a great post, clearly written by someone in a moment of reflection and vision. After denial comes anger, after anger comes acceptance ? To me this is the first face of acceptance and this is an absolute requirement to be able to deal with new realities.
Clearly many others have a long way to go to get to this point, and judging by the increase in general anger ( and yes - starving is a good reason to be angry) we have a lot of troubles to work our collective world through. I hope we make it through the angry stage - I not really sure I want to be too close if China, Iran, ...( add whoever is your personal bogeyman country) gets angry as the USA cops it for "stealing" their money, even if they made bad investments choices.
For me - I 'd like to know where all those lawyers are that normally chase ambulances - have I got a clean up job for them, but then again I already know the bankers will have paid them off as well. I guess the natural reaction is to blame someone to justify your own anger, and getting the bankers to cough up their ill-gotten gains would be my preference.
Having said that, it would be no solution as then by the looks of things there would be no one left to do anything at all, as the lot of them appear collectively very guilty of a minimum of greed to outright fraud and theft.
Getting past my own personal blame preferences, letting the whole system naturally reset to the worst lowest common denominator position seems so excessive, but I have to agree with David that the prognosis for any other solution does not seem that good right now. Maybe hope has to be a strategy choice after all.

Who Can Lenders Trust?

Have to agree that at least 4 countries may well drop off the exporters list, and agree that NOC's seem to own the production that mostly goes to export. I also have to agree with Rule that it is a game of economics, not geology. Assuming however this plays out with high oil prices in the medium term however - that another thing entirely. While NOC's may own the oil, they still use IOC's to finance and operate the extraction, and at their risk. It is not only that the NOC's divert money to social programs - there will also be a lack of financing capacity - both due to lower returns as well as higher risk, all of which will further limit investments. In the short term we will also continue to see demand drop - if only due to more efficient use of energy - so the balance act of the two large numbers of supply and demand is going to remain very hard to predict until the world gets back to a general growth trend again. Of far more concern will be the temptation for some to create events to scare the market, or to radically reduce supply. Nigeria scares and even events in Gaza have made little difference recently, one hopes that those who stand to gain most from higher energy prices do not start something even bigger. We live in uncertain times again.

The Banker's Dilemma

Looking to the possible consequences of this thinking, to increase velocity we will see commodities trend slowly higher to ensure deflation is kept at bay, and slowly - so as not to further damage overall demand.
The two kinds of USD need to remain boxed where they are until the "main" street system can afford to meet the "wall " street USD. The first kind of USD is trapped off balance sheet in toxic assets/liabilities and the second kind are those USD used for daily trade. At this time the overall system cannot afford to let them meet, hence the freeze up of the system. The trick - as we see as being played out now - is how governments can push enough money into the main street, without it being siphoned off to pay off the wall street problem.
My bet is on the slow but steady recovery of those commodities that have seen the worst of the recent price drops, while those that have seemed less affected will remain at remain flat at least.
As for anything financial - be it bonds, banks or whatever - its going to be toast for a long time to come as governments are forced to keep the financial service industry in the fridge to keep those two kinds of USD apart till they can afford - through controlled inflation and hopefully resurrected main street growth - to let them get together again.
Lets hope the patient work out approach will work, as the other approach of starting wars - either of the physical or the trade variety - to fight over the scraps of what remains, will certainly lead to a great deal more suffering by the world at large.

Oil, Stock, and Housing Declines

Seems people have forgotten when oil was 10-12$/bbl - it was not THAT long ago.
Fundamentals now support $80/bbl (based on marginal new production costs) - even with declining demand, and new increased Saudi production on line in the last few months. My simple view is that the OPEC members also keep their eye on return of capital, rather than just return on capital - so we will see production line out to demand by just cutting back to quota levels after the Sep 9 meeting. The loudest OPEC members in favour of production cuts will be those without investment portfolios - they need the cash to run their countries, and they are seriously struggling with $ induced import inflation.
The worst that can happen if the USA does not get its house in order is a bail out from the US$ by OPEC members, in favour of a currency basket for these oil producers.
My simple view is that the dominant OPEC decision will be taken one by one based on return of capital i.e a fear based defensive action looking at investment portfolios, rather than pure income only. We will see a dip to the $80/bbl level short term, but as soon as as any strength in demand returns, prices will jack up again as greed returns. That strength in demand can come from East or West, or from hurricanes or politics - it matters not from which cause, only when, as supply does not exceed demand by any comfortable margin.
The lower the price falls and the more jawboning on green alternatives, nuclear, drilling USA or whatever, the more real oil/product projects will be slowed - leading us closer to that supply/demand balance problem again.
I'm betting the energy sector will fall just as everything does during this downturn, but its pick up on the next cycle upwards will be faster and even more furious than the last rise from $10/bbl to $140/bbl.
Aaahh - but the only problem is the timing !!!

Global Stock Markets: Going Nowhere Fast

Any thoughts on why it was the UK market that turned first - maybe the weakest link, or just simply sharper at spotting problems ahead ?
Another casual observation of course is how long the turn in one market has taken to work its way through to other markets. We may live in a global economy ( linked markets), but it sure has seemed to take awhile for all to realise that.
Looking around in the GCC at all the crazy activity that has yet to even pause, one cannot help but feel something has yet to crack. But, then again, there is one huge energy bubble that may have to burst first.

Options Trader: Friday Outlook

Phil - you are always good for a read, but the anti-IOC rhetoric is getting to be a bit much. You have relentlessy failed to get it that more product is heading East - because they are prepared to pay more. No amount of US based BS is going to change that oil product flows to those who are willing to pay, and pay more to protect their future. If the US investment strategy in energy remains none at all, you can hardly blame the big oil boys for doing what they have to do for their own interests. Your country is bankrupt, both morally and financially, but again the Oil Co's did not do that, your own country men did that to themselves. Admittedly as things get tough, higher oil prices are to no one's advantage, but please try to get an egg in front of this chicken. Opec is next week, and one wonders how the investment portfolio is looking for some of the sovereign funds long on US and EU assets. Shutting back oil supply again to prop up pricing would be such a shot in the foot on losing capital, so here is hoping that the desire for a return to global prosperity keeps the pumps running and the market well supplied in spite of the possibility of lower short term revenues.
As for the Chinese operating in Iraq - supported by Russians, well perhaps someone else should share the load in getting shot at. I am pretty sure its no fun, no matter where you come from. If they manage to improve the flows from Iraq, it will just make the overall balance that much more manageable for everyone. Why the great bias that it has to be done by the USA if you feel so badly about these US based IOC's?
As for the politics - as an outsider it does seem important, but as smart people recently pointed out , like drunks on a booze binge, it only matters if someone can get folk to dry out a little, and manage the realities of living within their means.

Fishing for an Answer: Energy, Energy, Energy

Just reverse the extract below. As US interest rates are dropped to pay for previous bouts of money printing, oil prices go up as supply/demand fundamentals provide fruitfull ground for speculators to hold onto the "real" value of their money.

"The US dollar remains under pressure as 'old Europe' and other emerging country investors have figured out that the US is just all rhetoric when it comes to financial discipline. The Fed is hoping to print our way out of our oil driven financial deficit. Each time the price of a barrel goes up a dollar, Ben just rings up the printer and tells him to ship another batch of hundreds out the loading dock."

Maybe the US needs to realise no-one else is coming to play with them this time. They would all rather burn in hell, and take their chances on their own. It must be really bad for that to happen - one would think. The solution has to be that the US raises interest rates - burns its banks, but gets the oil price to fall to at least tolerable levels for the world as a whole.

Preparing for the Fall

Oil knows nothing - but the speculators chasing the price seem to know something. Just for the saying, what is short is refining capacity - not oil, and what is long are customers outside of the USA still willing (and I did NOT say capable) to pay for it. This can only break when a) subsidies on fuel start disappearing and b) countries start offloading their USD links, both directly in terms of currency and in terms of trade.
The markets will wobble and sway their way downwards as the pont of indifference between losing your cash on inflation or losing your capital altogether varies based on sentiments and manipulation of central bankers.
If you have the cash in hand - you may have to do a little hard work these days - and directly find, buy and manage companies with positive cash flow - using actual money. These are the only guys who will be the winners. The rest of us will be fleeced to pay off the bankers and the feds of this world - as they both need each other to survive, and they have the rules on their side to make sure they survive, and at your expense.
What is needed is a clear and delivered message of putting interest rates UP - to put some back into the US $. It will flush out the bad loans and all those who took a fat chance will pay for their mistakes and (unbacked) greed.
If this does not happen, it will be a slow slide to hell, and you will pay for it anyway in stagflation. However the bankers and the Fed will always prefer the slow boiled frog to the quick leap into the fire -the first way they get to stay in their jobs and plead that they had no choice. The result is the same - but the process even more protracted and painfull. Easy money is over - the system is striking back. Have an nice day.

How Much Worse Can It Get For Oil?

You all loved it when it went your way - all ups and no risk. Bitching is not going to solve the present mess - only concerted action to get demand down and supply up, and will get the present fuel price to level out (assuming the $ stays constant). To the extent that none of the easy solutions are still available - sorry - you are going to wind up paying the price. Now please someone tell me the investment strategy that allows me just to hold value - never mind lose my shirt !!!
Oh - and by the way - just watch out for that Iran war thing. Ever since time began it is the big wild card that really makes the difference. Hezbollah making coup in Lebanon is just getting a bit too close to absolute mayhem for financial comfort.

Toward a U.S. Energy Policy

Perhaps you should start throwing some rocks at your local Nimbies, both on LNG import facilities as well as new refineries. As long as it costs a fortune to get approvals in place to build - never mind the actual cost of building - refining capacity, imported energy, conversion of coal, and even new nuclear plants just will not happen in the time frame required to meet demand. The US Joe is now the victim of his own foolishness, simply as a minority was allowed to dictate the price to be paid by the majority. There is no one else to blame but your own past silence.