Ross Walker, senior U.K. economist at RBS and Luciano Janelli, chief economist at MIG Bank, question the sustainability of the U.K. recovery and whether more stimulus is needed in Europe. Here is a direct link.
Global demand in the economic recovery of 2009-2012 has been extraordinarily weak; literally a shadow of its former credit-bubble-self. And yet oil and gas prices today are back at cycle highs above 100 a barrel for oil and 3.60 a gallon for gas just as global supplies are literally overflowing. What gives? Its called speculation fueled by excess liquidity in financial markets courtesy of central bankers. Oil prices have soared 20% over the past 3 months alone in the latest phase of Fed-fueled mania. Levered trading among a few key players has led to bubbling prices that have enticed even more over-production and overcapacity. Meanwhile as confirmed by yesterday’s miss in US retail sales and this morning’s spike in US CPI, soaring energy prices are leaving consumers with less cash flow for everything else. The good news is that sloshing supply and tepid demand are destined to resolve themselves in lower prices, just as they did to the shock of Perma-bulls in 2008.
Gulf Oil CEO Joe Petrowski admits that Oil prices should be about half of today’s $105 a barrel and he predicts that they will be by the end of the year. Here is a direct video link.
Note the comic antics that the CNBC hosts go to to underline that Joe is not predicting $50 oil due to a plunge in global demand, but rather ‘only’ due to a glut in global supply. The fact is that even if global demand remains constant at present levels which CEO Joe describes as “weak”–highly unlikely in a global recession, but for the sake of argument lets concede demand stays constant from here—the trouble is that liquidity goosed asset prices are now only remotely defensible for investment at present levels, if global growth and demand rebounds over the next few months and continues higher indefinitely. Hmmmmm……
Day to day gyrations offer a veritable cacophony of algo pings on the hype and hope of central bankers. But this big picture portrait of North America’s S&P 500 and TSX along with key sectors (financials, reits, dividend stocks, energy, materials, gold cos) cuts through confusion. Ah yes, downturn progressing…always slow at first–and this time no doubt drawn out by a couple of years on QEternity–but moving toward its natural fruition all the same. Behold the business/market cycle now playing in markets all around the world.
Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.
Copper and the Canadian dollar also seem to concur. Don’t worry be happy?
Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.
So far, most commentators and participants don’t see it, but then most are not looking. Just the opposite, most financial types are paid not to look. But ready or not, bear markets are an inconvenient truth of every business cycle.
