Juggling Dynamite

The high-frequency algos went wild blasting millions of buy orders at risk markets yesterday afternoon on headlines that OPEC members might agree in November to freeze production near all time highs. But this morning sober thoughts are dawning that capping output at the highest levels in history–while the many other non-OPEC producers continue to pump-for-their-life amid slumping global demand–is not likely to sop up the excess supply here.  This chart of OPEC production since 1990 offers perspective.

Not only that, but as shown here in my partner Cory Venable’s chart of oil (WTI) since 2007, last cycle in 2008 (when OPEC had more swing sway than today),  they also agreed to cut in September after prices had fallen from $148 to around $100 a barrel.  They then cut twice more in October and December 2008 as prices collapsed 60% to the $40 range.

Apart from OPEC having less swing influence today, another obvious difference this cycle is that oil prices have already fallen and languished in the $40’s for 20 months since January 2015, and still global demand has continued to weaken.

Like central banks who are observing the economy today with ZIRP bullets rather than that 5%+ of loosening power they wielded in September 2007, global oil producers are not in the position of demand influence they once took for granted.

Today in the mean reversion phase of what was the largest credit-driven supercycle in human history, price cuts–whether on the cost of capital or of oil–are not enough.  Consumers, sick and tired from too much consumption, have adopted a new obsession:  saving more and spending less.   In the process, old prods and masters have lost their potency.

All the clean energy and electric vehicles in the world will be insufficient to combat climate change so long as animal consumption keeps soaring. That’s the conclusion of leading researchers at Oxford, who found earlier this year that emissions from food production will eat up a whopping 50 percent of our carbon budget in a few decades.  Thinking people who care about human sustainability are called on to evolve to smarter eating habits.

Some are leading the charge.  Patrick Brown, who rose to prominence as a geneticist at Stanford pioneering DNA technology that transformed genetic research is now a biochemist and founder of Impossible Foods which has engineered a veggie burger that bleeds and tastes like meat.   See: Why this bloody veggie burger may be the Tesla of foods.

Also listen to this enlightening podcast discussion with Brown, here is a direct audio link.

‘Patrick Brown on plant-meat that bleeds and the science of flavor’ by The Ezra Klein Show https://t.co/RqhT6AenC5

— Danielle Park (@kdaniellepark) September 29, 2016

Danielle was a guest today with Kerry Lutz on The Financial Survival Network talking about recent developments in the world economy and markets. You can listen to an audio clip of the segment here.

Further to the discussion, political distancing efforts re Deutsche Bank are in progress, see Political support for ‘dinosaur’ banks must end – Bundesbank’s Dombret:

Andreas Dombret, the Bundesbank board member in charge of supervision, said banks’ deficiencies should be tackled and the sector should be allowed to shrink further.

“Political support for the banking sector must finally come to an end – something that unfortunately I’ve only seen to a limited extent,” he told an audience in Vienna.

“Crucially, we cannot discuss away the structural deficiencies of the banking sector.”

Comparing banks to dinosaurs, Dombret said they should not hope size would save them from extinction due to threats such as a reduction in the overall amount of debt in the economy, competition from financial technology companies, an ageing population and low interest rates.

“A lesson from the era of the dinosaurs is still true today: size is not a goal in itself,” Dombret said. “Neither is the size of a single bank a guarantee for their survival, nor can the size of the sector as a whole protect it from crises.”

Also see more on the pension deficits story here:  Dallas Police see exodus as doubts rise on pension promises.