insideoil

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.

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.

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.

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.

Look to the Markets to Assess Inflation

Simply add the thought that oil at $100/bbl today is the same value arguably as oil at $60/bbl, based on old exchange rates US$/Euro. The conclusion then is that it will be US equities that have a problem, not the rest of the world- as it is only the US (and US peg countries) really seeing the inflation.
Maybe you could do the same analysis, but from the perspective of the Euro ? I for one would be most intrigued to the outcome.
Perhaps also add to this the inflationary impact all those extra petrodollars will have - unless GCC/Opec players switch to Euro's or a basket of currencies.
So many options - so little time !!!