Are Stocks the Next Oil (or Uranium, Copper, Silver)?
See: Oil collapse couldn’t come at a worse time for industry
See: 2007, when everyone was convinced of ‘Peak Oil’ and there were websites named ‘Peak Oil’, ‘Oil Drum’, etc. constantly reinforcing the mania.
I remember being away on business one day in 2007, with nothing better to do in my hotel room than watch the congressional debates about ‘peak oil’ and what to do about the evil speculators that were driving prices up. I enjoy watching a good mania as much as the next guy. I realized that what we were seeing was ‘Peak Hysteria’ with respect to this phenomenon. I thought, ‘Yup, Prechter’s right’.
You may have caught the title’s little inside joke.
Sometimes you (well, I anyway) can look at a graph representing data that is a culmination of history (i.e. reality) and just let it settle in for some perspective and even some conclusions.
Whether these conclusions are right or wrong is subjective and open to debate. But what I see here when viewing the Prime Rate historical is summed up after the graph (graphs courtesy of Economagic, mark ups mine).
I put this post together as a curiosity. Per international data, the world has now created 4 times as much debt than the combined reserves and M0, M1, and M2 in the world. Out of these reserve and M numbers only $5 Trillion is circulating outside of the banking system. There is 171,000 tons of gold or 5.5 billion ounces, or approx $6 trillion of value, in the world. Total assets are valued at $241 Trillion. The elites have taken us to the wall.
Exeter would be proud and alarmed at the same time.
 the post started as a simple thing and ended after getting way too involved. so much the better…
An update of the situation on the Banks, the anti-Banks (gold) and the yield relationships that would help define their fates.
The Bank index is breaking through resistance this week while gold remains in Palookaville. Note to certain bloggers out there who would nitpick: the arrows are not meant to line up (green to red); they are meant to show support and resistance for the Banks’ lows and Gold’s highs, respectively.
There are many more details and indicators that inform well balanced ongoing analysis, but the three scenarios below are the general options before us. Excerpted from this week’s edition of Notes From the Rabbit Hole, NFTRH 342:
- Inflation signals do change their trend, long-term yields continue upward, the [yield] curve continues upward, oil continues upward, copper breaks massive resistance at $3/lb., stock markets remain aloft but under perform and silver out performs gold in a new ‘inflation bull’ as the promotions for everything from REE to Uranium to ‘Peak Oil’ would be back on. We could make money in that environment; in commodities, precious metals and stocks (with a global view).
- Inflation signals fail, long-term yields drop again, the curve continues upward, stocks get hammered, commodities resume their bear market and gold eventually grinds out an outperformance, much like it did on the 2014 up leg of the Gold-CRB chart below. We should preserve capital in that environment while positioning for the next bull market in the gold stock sector.
- Inflation signals fail, long-term yields remain stable or decline but the yield curve resumes its decline as short-term yields firm up vs. long-term yields. This would return Goldilocks to the picture. Stocks would like this scenario and precious metals and commodities would not. This would be an extension of what has gone on post-2011. We might not like or agree with it, but we would have to respect it.
I follow four areas of the market very closely; volatility, miners, gold, and the SPY index, and everything smells of deflation. I trade on the 2 and 4 hour, but I took a step back and looked at the monthly, weekly, and daily charts and everywhere I look it smells of lack of oxygen.
The broad market has a decreasing positive slope (8% y-t-d), and why not, you cannot continue to have 10-14% (from 2014) annualized growth rates with no GDP, Income, or fixed income rates. The charade started with a relative yield trade, then a squeeze volatility trade, and now we are wrapping up the leverage the balance sheet trade. The Central Banks and politicians have done everything except the right thing, and maybe because the right thing is the hard thing.
At the prodding of an NFTRH subscriber who was combing through old issues, I went back and read NFTRH 7, from November of 2008 and was struck by how things have really not changed in the last 6 years of non-stop inflationary policy; they have intensified and gone global, but the mechanics have not changed.
The current inflation operation is failing world-wide, with the US holding out for now. As pertains to the gold and gold mining case mentioned in the article below (as we got hyper bullish in Q4 2008), things are moving much more slowly now. The current backdrop is a different animal than the 2008 deflationary impulse, but its potential is to much more wide-ranging and ultimately destructive. (more…)