Commodity Trade Mantra

Posts Tagged ‘Energy Prices’

The Fed's Measure of Inflation is Furthest from American Reality

Ben Bernanke first set an official inflation target in January 2012, aiming at 2%. Has it been achieved? Well, it depends on how you measure inflation. There are many to choose from. The Fed has chosen the one that is most suppressed and furthest from the experience of most American households. So the Fed can pretend that inflation is “too low,” whatever that means.

Low Oil Prices Didn’t Boost Consumer Spending, Nor The Economy - Here's Why

There is no question that lower oil prices have been a big windfall for consumers. But we’re not seeing much evidence that consumers are spending those gains on other goods or services. While a sharp increase in oil prices can reduce U.S. GDP growth, it’s harder to see evidence of significant net gains for U.S. GDP from a sharp decline in oil prices. Here is why.

This is not 2008 – At least not for Gold Prices

Both, low energy prices & higher real interest rates are already reflected in the current gold prices. As longer-dated oil prices cannot remain below industry costs indefinitely, nor real interest rates rise much higher given a data dependent FED, this creates an asymmetry to gold prices, regardless of broader market normalization – or capitulation.

Bullish Bets On Oil Prices Up But Market Stalemate Remains

Bullish bets on crude oil are increasing after the recent snap-back in prices from retesting the lows earlier in the year. We find ourselves in a highly volatile day-to-day price environment, as oil prices are unwilling to push too much higher given the backdrop of oversupply, but are unwilling to push too much lower given an ongoing narrowing of the imbalance amid strong demand.

Gold Will Soar by at Least 81% - Ross Beaty

Legendary resource investor Ross Beaty likes gold at today’s prices, down 42% from its all-time high. He says. “I like gold partly because I’m a contrarian & nobody else likes it now, always a great bottom indicator. Also because it’s a kind of refuge in the storm that’s blowing around the world financial markets today with unprecedented moves in currencies, energy prices, etc.”

Price Manipulation In The Oil Markets?

Whether price manipulation is occurring now in energy prices is debatable but be aware, as where there is smoke, there is fire. The question: When is enough, enough? When does it ultimately damage the faith in “free” trading in all assets among investors? Volumes have been declining reflecting a loss in investor confidence.

Market Fundamentals Make Oil Price Increase Unlikely

Fundamentals haven’t changed much & the world is still oversupplied with oil. There are no obvious signs that this trend will reverse in the near future. The worst case scenario, according to the investment bank Goldman Sachs, is that oil prices will drop to as low as $45 per barrel in the next three months.

Why Energy Costs Are So Important To The Global Economy

A plausible explanation: Though energy cost inputs aren’t the only thing to consider, they are important. The high energy costs of the last decade or so may be, in part, responsible for low productivity growth. Conversely, low energy costs would imply more output per dollar of energy consumed.

Beware: Fracking Is Where Money Goes to Die

The fracking boom has been cash-flow negative for oil and gas drillers from the very beginning. The steep decline rates of fracked wells force producers to drill more wells just to keep production and revenues flat. They fund this drilling with debt. To support that growing debt, they have to produce more & take on even more debt.

The Fed Waited Too Long: Here Comes Inflation

This inflation surge is going to be led by wage inflation. By the time the Fed realize that the labor market is so tight that employers are voluntarily raising wages across the board it is far too late, you are officially behind the curve as the surge in wage inflation is signaling loud and clear. The Fed will have no choice but to raise rates fast.

Citi Warns - Central Banks Grip On The World Economy Is Waning

Not only are central bank policies having a disappointing effect on business sentiment and investment; they are failing even to revive inflation expectations. Despite having growing doubts as to central banks’ ability to create durable economic growth, we remain convinced as to their ability to push up risky asset prices.

Goldman, BofA Warn Crude Oil Crash Will Have Negative Impact On GDP, Earnings

The direct negative effect of lower oil prices on Energy earnings is clear. Given this historical relationship and oil futures prices, Energy earnings are likely to drop by more than 50% year/year in 2015. This fall would result in an S&P 500 earnings drag of roughly $65 billion, or more than $7 of EPS vs. 2014.

Hurts So Good: When Exactly Are Falling Prices Bad?

Though a cause for celebration to the layman, economists argue that falling prices will harm business and lead to unemployment. Falling consumer prices are good for the consumer & the economy, but they are bad for central banks looking to maintain asset bubbles and for governments looking for a graceful way to renege on their debts.

Oil - The Black Gold Loses Glitter

If oil stays low, it may turn out that entire U.S. oil boom was just one of many Federal Reserve inflated bubbles. If it pops, the job losses & debt defaults that would ensue could have a far greater impact on the economy & the credit markets than ever before. Ultimately then, QE 4 may need to be much larger than QE1, 2 & 3 combined!

The Problem With Credit Booms Is That They Are Followed by Busts

Research on private sector credit booms over the last 20 years show that whenever credit to the private sector expanded by 30% or more within a 10-year period, a banking crisis & recession resulted without any exception. Credit booms always end badly & last longer than rational minds expect.

Limits to Economic Growth at our Doorstep, but not yet Recognized

It is the collision of the lack of economic growth in the real economy with the need for economic growth from the debt system that can be expected to lead to collapse. The hidden parts of our economy are being affected by depletion. How long can economic growth continue in a finite world?

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