This page has been archived and commenting is disabled.
The Confessions Begin: Goldman, BofA Warn Crude Crash Will Have Negative Impact On GDP, Earnings
"The plunge in oil prices is unambiguously good for the US economy
- Virtually every "pundit" with a business suit, who collected a $200 CNBC appearance in the past 3 months
A week ago we showed that, using Gallup polling data, the crude crush has clearly led to a "spending surge" among US consumers: whereas a year ago all US consumers spent $96 per day, this December, with crude and gasoline prices roughly half off, Americans spent a self-reported whopping, drumroll, $98 per day.
Worse, as is well-known the biggest marginal beneficiary of low gas prices are not wealthy US consumers, for whom the elasticity of gasoline (and crude) prices is irrelevant, but poorer households, those making under $90,000 a year. It is here that the spending spree was an even more unprecedented $1 more, from $84 a year ago to $85.
That's the good news.
The bad news is that contrary to conventional wisdom, as even Bank of America and Goldman now admit, sliding crude prices will have an increasingly more negative impact only not on economic growth but S&P earnings... something we said from day one.
Here is Bank of America becoming increasingly less cheery:
Despite conventional wisdom, investors seem to be on edge, with the 10-year yield below 2% and equities stumbling. Global disinflationary fears are growing, with concerns that the US will not be able to decouple from weakness abroad. And despite the benefits of cheaper gasoline, reports of a recent shale default and cuts to energy capex are putting the focus on downside risks. In our view, those risks are contained.
In our Year Ahead piece, we highlighted the downside risks to the energy patch from falling oil prices. At that time, based on our 2015 oil forecast of $90/bbl, we saw around 0.1%-pts of risk to GDP. But continued declines in the oil price suggest mounting risks. Here, we gauge the downside risk to growth if oil stays at $50/bbl. Already, rig counts have fallen to 1482 in the first week of January from a high of 1609 in October last year (Chart 1), suggesting declines in exploration/drilling outlays.
Although that 8% drop appears modest relative to history (we saw a 60% decline in the 2009 recession), Chart 1 shows that there’s about a four-month lag in the response of rig counts to weaker oil prices, so there’s likely more pain to come. Indeed, our Oil Services team sees a near 15% decline in rig counts in 2015. It’s important to note that the relationship between oil production and rig counts is non-linear. As our Commodity Strategy team points out, early reductions in rigs don’t necessarily imply falling output as operators may initially shift resources to more economic wells, keeping production intact. As prices fall further, the decline in rigs may eventually trigger greater curtailments in production. Thus, we see a notable lag of several months in the response of production to weaker prices.
The good news is that oil and gas extraction accounts for only 1.8% of GDP directly, suggesting a small hit to the overall economy. For example, if energy production were to fall by 10% in 2015 (just shy of the 14% decline in the recession) the decline in production would slice 0.2% off of GDP.
Needless to say, oil is not only 10% lower than the $50/bbl price when this note went to print on Friday, but is about 50% below BofA's 2015 oil forecast. So... what were we talking about again?
And then there is BofA recalling that Investment is a very distinct component of GDP.
With the oil price falling, capital budgets in the energy sector have come under renewed pressure. According to Census Bureau’s Annual Capital Expenditure Survey, roughly 90% of energy capex is allocated to structures investment – namely outlays for exploration and wells. Spending there tracked an annualized rate of $140bn in the first three quarters of 2014, a sum that accounts for a whopping 30% of total non-residential private fixed investment in structures (Chart 2), or about a 1% of GDP.
In our view, there are important downside risks to the outlook for capital spending. Already, a number of energy firms have announced cuts to capital budgets recently, expressing caution in an environment of falling energy prices. If we use history as a guide, there are five notable periods of decline in energy capex since the early-80s coinciding with falling energy prices.
Based on the magnitude of the capital spending decline in response to falling energy prices historically (Table 1), we think that if the oil price in 2015 averages $50/bbl (marking a 50% decline relative to 2014), energy sector capex could fall by 40%. That’s about 1% of downside risk to non-residential structures, all else equal, or a hit of 0.3%-0.4% of GDP.
Or, one could just read what we warned back in November when we explained that the "Imploding Energy Sector Is Responsible For A Third Of S&P 500 Capex." We are happy that Wall Street has finally caught up with what our readers knew 2 months ago.
And then there is Goldman, where the first Mea Culpa came from equity strategist David Kostin who said:
Reduced energy capex will also hurt profits in other industries. In contrast, lower oil is a positive for the US consumer, but likely not enough to offset the Energy sector drag on overall market earnings.
The direct negative effect of lower oil prices on Energy earnings is clear. Energy firms account for 8% of S&P 500 market cap and 11% of earnings, and EPS have a strong historical relationship with the commodity. 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.
Better get that multiple-expansion thesis going then. Oh wait, it was Goldman which two months ago said Multiple Expansion Is Over. Well then...
But it gets worse, because according to Goldman the biggest driver of stock upside in 2014 and also in 2015 - stock buybacks - is about to be punched in the face.
Buybacks are also at risk. Energy accounts for 9% of S&P 500 buybacks, in line with their market cap weight. In the past decade, Energy firms have increased the share volume of repurchases during periods of falling crude prices and stock valuations, but buybacks have nonetheless declined in dollar terms. A decrease in Energy buybacks proportional to the fall in oil would represent a $35 billion headwind to the aggregate $107 billion (+18%) growth we forecast for S&P 500 buybacks in 2015. However, the slow start so far in 2015 is not unusual: January is typically quiet, accounting for just 3% of annual repurchase activity, while February sees double that amount.
In short: dear BofA and Goldman, welcome to the red pill party.
To summarize what we have said since September, here is Bloomberg:
Forecasts for first-quarter profits in the Standard & Poor’s 500 Index have fallen by 6.4 percentage points from three months ago, the biggest decrease since 2009, according to more than 6,000 analyst estimates compiled by Bloomberg. Reductions spread across nine of 10 industry groups and energy companies saw the biggest cut.
Earnings pessimism is growing just as the best three-year rally since the technology boom pushed equity valuations to the highest level since 2010. At the same time, volatility has surged in the American stock market as oil’s 55 percent drop since June to below $49 a barrel raises speculation that companies will cancel investment and credit markets and banks will suffer from debt defaults.
One big market risk from lower oil is the prospect that it will freeze energy-related capital spending, according to Savita Subramanian and Dan Suzuki, strategists at Bank of America Corp. Earnings in the S&P 500 may be as much as $6 a share lower than analysts forecast this year should oil stay below $50 a barrel, they estimate.
“Either there is nothing to worry about and crude is going quickly back to $70 plus, or we have entered an earnings down cycle for an appreciable portion of the market,” said Michael Shaoul, who helps oversee $10 billion as chief executive officer of Marketfield Asset Management in New York. “I don’t see much room for a middle ground and I don’t think the winners will cancel out the losers.”
Precisely. And to complete the humorously circle, here is some more delayed comprehension comedy:
“My initial thought was oil would take a dollar or two off the overall S&P 500 earnings but that obviously might be worse now,” Dan Greenhaus, the New York-based chief strategist at BTIG LLC, said in a phone interview. “The whole thing has moved much more rapidly and farther than anyone thought. People were only taking into account consumer spending and there was a sense that falling energy is ubiquitously positive for the U.S., but I’m not convinced.”
Yes, Dan, in retrospect everything is much more obvious. And thank you Dan for finally SHIFT-F7ing "unamobgiously good" and teaching us the übiqutiously positive" synonym. Even if Wall Street's value-added is boosting one's SAT vocabulary, we will take it...
»
- 48777 reads
- Printer-friendly version
- Send to friend
- advertisements -
The Circus is on Bitchez
15% drop in rig counts in 2015.
When will the BS end? We'll be there within a month, try 75% or more.
Jim Cramer says "Get negative on everything!":
http://www.cnbc.com/id/102329387
Just so we all realize who stands on the same side of the boat with us.
What gets me is how all of these "reports" are focused on what's good for GDP, earnings, etc...
They never discuss the little bit of relief that the common man feels for $1.79 gallon gas. Always gotta find a negative.
Earnings, earnings, blah blah.......cut in stock buybacks? Holy crap! Sell!
Now that America's shale industry is being put out of business, this is the perfect time to look at alternative energies and start replacing oil once and for all. There are plenty of green alternatives to oil such as wind and solar, so I don't see why we even need oil at all to be honest. Global warming may not be in the news as much as it used to be, but don't let that fool you. Scientists have warned that the threat of climate change is greater than ever and we need to take action in order to avoid disaster. Either we take exreme measures now to combat climate change, or the climate will force us to.
I put a sail on my car.
I put wheels on my boat.
We Will Not See $50 Oil Again
This is more manipulated than nymphomaniacs va jay jay at a sex club convention.
They are priming the pump for bail-outs though they might just get a rousing 'up yours' from congress this time around because it'll be way too obvious and congress-critters are allergic to nooses.....
Hey , just add tax onto the gas until it's back to $4.00 , then you'll be able to pay the unemployment and EBT cards for the laid off workers, all works out in the end.
There are plenty of green alternatives to oil such as wind and solar, so I don't see why we even need oil at all to be honest. Global warming may not be in the news as much as it used to be, but don't let that fool you. Scientists have warned that the threat of climate change is greater than ever and we need to take action in order to avoid disaster. Either we take extreme measures now to combat climate change, or the climate will force us to.
What absolute utter nonsense. I've been off the grid for nearly 10 years now. When the sun shines my electrical energy comes from solar. But to be adequate to my needs, I have resorted to abandoning "all" refrigeration in deference to canning and garment selection. The only thing I use electricity for now is to power my computer and for a tiny amount of light at night.
This winter in my part of Texas we have had an unusually large percentage of overcast days ... thus no electricity. I've had to resort to a gas powered generator to recharge my batteries ..,. albeit only about 1hr per day because I now use so little electricity.
I can "prove" that my cost of energy production is 10 times what it would be if I was on the grid. One advantage I've had: with two hurricanes and a couple widespread fires, I've never missed a minute of electrical power while those on the grid have had serious interruptions.
Re your global warming nonsense: I read the emails ... did you? They spell out the obvious deception that is global warming! No amount of "yeh but"s is going to put that genie back in the jar ... just like WTC7 falling down will always prove 911 was an inside job.
"just like WTC7 falling down will always prove 911 was an inside job".
Not to mention the perfectly circular hole in the pentagon with absolutely no other damage from wings or undercarriage.
The fact that we have come this far with the mainstream narrative still largely intact is a testament to the absolute control some very dangerous people have over the media. Not to mention just how utterly gullible the majority of people really are.
i feel the same way.
solar and wind are about fierce independence. they DO generally cost more, especially if you run thigns like refrigerators and even pretend you can charge your electric car.
solar and wind are not about sustainability , not yet and probably not until some miraculous advances are made in both fields. natural gas, oil , coal and nuclear and plain old wood are just great.
i'm glad to see there are some people with the same mentality about being grounded in reality and yet being optimistic and gonzo enough to go it real and independent.
and yet, ---there is nothing quite so unique as being able to set up your own grid quickly without recourse to continuous shipments of fuel. you can live FAR from roads.
Withglee, not having enough power to use refrigeration is a capacity planning error, not a fundamental impediment to using solar where you are located. Sure, there are cloudy stretches, but that is also about capacity planning.
Good luck on your off grid way of life; I would not be up to the challenge unless stuck in a bunker during a nuclear winter.
It's not an error, it's a choice. I have an electrical engineering degree. My hobby is electronics. I know in detail exactly how much energy goes into my system at every node and how much comes out of it.
In the beginning I ran a small office refrigerator. When running, it took 120 watts. On average it had a 30% duty cycle ... thus, on average it was a 40W load ... less than if you leave your closet light on. That was my single largest load, easily and more conveniently replaced with canning. More people should try canning because you can prepare a wide variety of splendid meals in minutes using that technique.
I use high voltage panels and MPPT charge controllers to minimize transmission losses.
I have tried different inverters. I've come to choose small inverters for each load (typically oscilloscope and function generator). Other than that I've gone to DC for all loads. You can now buy 98% efficiency buck, boost, and buck boost power supplies for less than $10. I use them to charge my smart phone and satellite radio and LiMH batteries. I wear a headlight when working inside as skylights don't allow enough light for close work after losses in my transparent insulation.
Batteries are also a big issue. I use 6V deep discharge golf cart batteries. I've experimented with super caps in an effort to get longer life (4 years is about what I get out of batteries) ... supposedly I get more with super caps but they're more expensive and have greater self discharge. It's not the right application for them.
If you have a better design for the money I'm all ears.
I'm retired so being off the grid is not really a challenge. It wasn't even initially a choice. My neighbor would not let the utility company pull a wire across his land to bring me service. They said if I had another route they couldn't use condemnation to get the right-of-way. I like freedom enough to let him have his. My alternate was 5 poles at their price of $4,000 per pole, and easement from another land owner, and lots of right-of-way clearing. I turned the challenge into a game. It's a conversation piece and I like the independence ... but other than that, it's severely stupid!
If it was about living through nuclear winter, I would choose termination. Living amongst this stupidity we have cultured is not really living. It's time we came to our senses and ostracized the creeping crud that has compromised so many of our sensibilities and confiscated our productivity.
That said, I would suggest everyone switch to rain water immediately. It is so much better than what comes through our pipes and by bottle from Arkansas. We would also be wise to choose alternatives to cleaning our nests with water flushes. I am so amazed that Bill Gates spends money looking for toilet ideas and turning toilet water into drinking water. The best idea I've found, bar none, is a post hole digger.
http://m.youtube.com/watch?v=HNg7iO3db7k
U S Military Use Weather As A Weapon Worldwide
I just have zero rebuttal, that is perfect. Send your info to the Nobel folks.
You down voting idiots. MDB is a brilliant troll. His posts are always 100% (or more) sarcasm. He always crafts the perfect thoughts of the typical media watching american turdbrain.
He is flawless .
Dear Mr. Million Dollar Bonus:
Your comment: "There are plenty of green alternatives to oil such as wind and solar, so I don't see why we even need oil at all to be honest."
This is, indeed, aggravating news. I thought that you were in a permanent circle jerk vacation with your liberal nut head tribe.
No there ARE NOT plenty of green alternatives. We have gone over this many times before!
No, you can not pump sunshine nor wind into a gas tank.
Solar and wind power produce electricity not gasoline.
I am really getting aggravated now! We are supposed to be exceptional Americans!!
You are just plain old stupid, liberal ideologue, poop head!
Hint: Electrical energy can be changed into chemical energy. Look it up.
Another hint: except for volcanos, fossil fuel burning, and nuclear power, the entire biosphere is powered by the sun on a daily basis. It works. That means the sun can provide all our energy needs, if it was absolutely necessary.
Hint3: wind and hydroelectric power are actually powered by the sun.
Please stop by more often.
"Global warming" you still using this lie/tool ? sorry it will not work here with Zh readers, I think you need to post this on CNN ,it will definitely work (100% guaranteed) , just sayin
throw some hydro carbons on the fire
Alaska.....2014 warmest yr in recorded history
Alaska.....2014 warmest yr in recorded history?????
According to who?
Alarmists have claimed 2014 was warmest year in history. But checking reveals this is according to the Japanese Met Office using a self-selected set of surface temp recording stations. When you check the records measured by satellites and published by NASAs RSS (remote sensing systems) and the University of Alabama, Huntsville (UAH), their comprehensive and non-selective data both agree that 2014 was only the sixth warmest in the past 18 yrs, and there has been no upward trend in world temps since 1997.
As ever you can 'prove' anything in Science by being selective with data. Just find an excuse for 'adjustments' so it all fits your prejudiced hypothesis. (Hmm, sounds like economists with GDP etc have learnt the same dodges!)
Ive long learnt that most Scientists (and economists (who are not scientists) get things wrong (remember the millenium bug?!). Never trust their word but demand the primary data and check it rigorously - thats where you discover the truth and falsehood of their prejudices. Check the IPCC data - its selective and not there. No-one has shown how CO2 supposedly works in the atmosphere to cause warming. They base their conclusions on experiments with bell-jars that dont represent reality. In a bell-jar Oxygen can cause warming - so best we tax Oxygen?!
It's called satire, welcome to ZH.
Im gonna up vote you MDB even if youre Sarc..
Solar Energy will be N2O that sends silver prices even further into the stratosphere and then into the outer solar system...
It will become the most precious of precious
HT bitch
I developed an engine that runs on water and peaches, and exhausts peach moonshine. I call it "the Thumper"
Too bad peach season is out !!!
maybe oil's going to zero this time around what with a surge in alternatives and cratering demand from the fact we dare not burn what's left.
Since my car was repossessed, I have to walk to Walmart to use my EBT card. Thanks for pointing out how good that is for the environment!
Today yes the common man and woman can appreciate a few dollars savings a day, but when rig after rig is closed and never be opened again and the man loses his job operating that rig and the woman loses her job working office support, well, it will feel a lot different.
Well this is just like China loading up 50 million peasants who will work for $1 / hour and unloading them at our border. What do we honestly *think* will happen to our GDP? Same goes for this cheap oil being flooded into the country. Let's face it the EIA reports of gasoline consumption have showed massive declines for the past five years... But in the last three months it just all turtles and tanks after the Kerry / Saud meeting..
It's not being manipulated to choke the American oil industry no!!!!!
If Saudi Arabia can REALLY get oil out of the ground for 20 bucks a barrel then they can play this game forever, just like China has an endless supply of $1 hour labor. So when are we going to decide to stop trying to compete in this game of sadomachism and punishing American citizens just because some other nation decides to do it to their citizens...
Because protectionism is NOT politically correct. It is not for us to ask why, but to bend over and take it up the ass. When we buy commodities for less than we can produce them, inevitably it will lead to a loss of jobs. But its cheap while we can still borrow the money to buy it.
Then the steel workers, then the truckers, then their office staff....
Then the ofice supplier, then the restaurants where all the previous mentioned trades eat lunch, the food supplier, etc.........
even the blow will be cut more and the bitchez will be bitching...
double clic bitchez
He is saying what GS pays him to say and they just cut their outlook. BTW, isn't it a little late to cut their outlook? Or are and have they been driving oil prices down when the Fed pulled their POMO oil longs.
Banksters signifying that the oil price is bottoming.
Yup....they need retail on the other side of this trade
I'm telling you guys it's going to $35 dollars a barrel for a good little stint, then when it's really cheap were gonna goto war. It's cheaper to transport an army and all it's supports when oil is cheap, than to do it when it's more expensive.
mid thirties, then the sky will fall and you will get the blues,ha...
Great! ... I might have to rethink this now.
"Forgive me Lord, for I have sinned."
silver tags 17 $
early Tuesday morning
for these guys to cop to any negativity, it must be much worse than suspected.
crude vortex....
Oil is the lifeblood of the economy say the economists, so if the price is flatlining one can discern....
best be wearing a survival suit
if you're in that life raft..
That, and so they can say "we were right all along."
Jackasses.
Oil prices go up, or there will be a bond crisis. Too many junk bonds issued to support the industry and too few GAAP balance sheets.
So now ZH bemoan the loss of Banksterism.
WHODATHUNKIT!
Where would be if they weren't blowing TRILLIONS and Jimmy Cramer weren't screaming BUY BUY BUY!
Give it a rest. So what if Wall Street is out another trillion?
Guess what! You'll get MORE OIL CHEAPER YOU MORONS.
Pssst, if they were taking on debt at $100/bbl, they're going to go out of business at $45/bbl and we'll get less oil.
man if I was Japan I would be ecstatic over these cheap oil wars... it's nothing but good for them...
hmmmmm
buying expensive dollars with cheap yen
to buy deflating oil
what could possibly go wrong here
SHOCKING!!
Oh... I thought all was well.
Good time to start huffing crude.
It is, if they are writing papers about how we are going down then that means the bottom is in.
I bet Goldman is covering its shorts here and reloading on the lowered expectations then in a few months when the market is 10-20% higher on the upside 'surprise' they can release articles about how we are going to the moon, everything is fine and now is the time to buy again so they can reverse positions again.
The cycle continues.
Of course we all know they are already insolvent . . . . . . but the real question is which of PDs is even MOAR insolvent now?
No chance in hell USD skyrockets with clude plunging and nobody is wiped out on paper due to positions they've taken at 30x and 50x leverage. Unicorns????
Yup. Unicorns.
wonder if they
taste like chicken ..
This is how we can spend less on oil AND use less oil.
Financial Reset & Global Environmental Exhaustion, the final fix?
Looks like the false economy is catching up with the real economy, I guess there will have to blame it on something since they cant seem to get the war started with Russia, Syria or North Korea
HOUSTON — States dependent on oil and gas revenue are bracing for layoffs, slashing agency budgets and growing increasingly anxious about the ripple effect that falling oil prices may have on their local economies.
The concerns are cutting across traditional oil states like Texas, Louisiana, Oklahoma and Alaska as well as those like North Dakota that are benefiting from the nation’s latest energy boom.
“The crunch is coming,” said Gunnar Knapp, a professor of economics and the director of the Institute of Social and Economic Research at the University of Alaska Anchorage.
http://www.nytimes.com/2014/12/27/us/falling-oil-prices-have-ripple-effe...
It's not so much real v false economy, as it is the real v finacialized economy (granted the finacialized economy seems false to anyone who does not have the financial resources to participate in the fincialized economy).
The increasing and divergent impact of crude prices upon the two economies is a byproduct of the erroneously named (and declining) velocity of money, which makes the real economy less "relevant" to TPTB as real financial transactions generate incrementally less GDP per transaction.
A trillion in stranded capital?
WHO CARES???????!!!!!!
I say again...YOU WILL GET MORE OIL NOT LESS.
All this "end of the world" mularkey has clouded your minds.
Here's the thing. I think it was Goldman Sachs that was behind most of the fraudulent fracking industry loans. They have to get this thing taken care of quick.
Really?
"We must save Goldman's Sack! We must save Goldman's Sack!"
This place really IS Dick Cheney's homepage.
why do i feel $60 oil is a setup for dow 25,000?
can oil crash in a vacuum?
No too much outgassing.
pull my fiat...
Oil above $50 - and up in to toe $100s - was the result of financial speculators playing with 0% money. Operators need to tighten their belts and make their business profitable at $25 - which is what the price was for decades and decades - and not too long ago.
The Saudis break even price is <$5 - and they've amassed a war-chest of ten years worth of UST they can spend on this new "rainy day." Once all the competitirs are bankrupt (or nationlizied) they'll be able to come back in and run up the markets with their friends on Wall Street.
Try $250.00 oil in the near future, Then, the economy will collapse from financial perturbed oscillations. A black swan for sure. A crude oil black swan. This is equalibrium change in a complex system People are "sucking-up" low oil prices and it won't last. Crash is coming in all markets except PMs. The Energy markets are going to price cycle and rip apart everything we consider part of our society.
US$250 bbl prices the producers out of the energy market and makes all sorts of alternatives economically viable... they don't want that, so that price won't happen if they have anything to say about it...
We'll find that those alternatives aren't the panacea that we're told they are.
We need Warp Drive, Scotty, now.
I dunno Captain. The engines are strained. Those oscillations are going to tear her apart.
This whole problem sounds like a bad remake of an episode from Star Trek, TOS.
Except there isn't any Captain Kirk or Scotty to save the day.
Where is the Plunge Protection Team? Heh...heh...heh...
There will be an attempt at Price Controls. Otherwise they will just let it happen and let the whole God damned thing comes apart at the seams.
The Governments will raise Road Taxes in order to stop the bleeding and yet will exacerbate it in doing so. Instead of encouraging people to consume excess, out of the ground, inventory they will discourage it and prices will continue in decline. until most producers shut down due to capital loss prevention.
yes, it was those damn speculators! /sarc
....what me worry
If we're saturated in debt, monthly savings goes to service the debt a little bit longer.
If there is enough fraud within shale derivatives, it wouldn't matter.
So things are pushed off, or not, who knows?
You know why we come to fight club? Because Tyler doesn't lie, just exposes bullshit (with their own slant yes). Remember how when gas started falling, Tyler was running around like a chicken with his head cut off. Then we saw a slew of articles relating the positive side effects of the drop in crude (though dripping in sarcasm). Then the slow trickle of the negative aspects. Suddenly this. Lower price in crude is being prepped as the scapegoat for 2015 and possibly beyond.
Now, the shitnami tidal wave is coming boys and girls. Get ready.
https://www.youtube.com/watch?v=QuoAdirVFW4
Fight club
LOL
It's become a goddam orgy for people badmouthing their country
So, what are the good things?
So I was commenting on low gas prices to my wife the other day and my 12 year old son chimes in "hey dad, if gas prices keep going down like this won't the workers start losing their jobs". I just looked at him kind of stunned knowing that he gets it. Low prices, while good for us, isn't necessarily good for everybody.
I'm OK with stuff getting better for me personally.
You know, if we had any vestiges of free markets left in our DNA we wouldn't need to feel embarassed to say that.
Usually when I talk about economics or politics in the house I feel like I'm talking to a stump because nobody seems to care (oh there goes dad again). That's why it was a surprise to me when he said that.
sounds like your son is smart enough to listen with his ears instead of his mouth... nice work, he's listening, keep it up
"Usually when I talk about economics or politics in the house I feel like I'm talking to a stump because nobody seems to care ..."
That is true for me for 90% of the people that I talk to.
There must be a shortage of "red pills"
He's angling for a good spot in your will, Dr.
Yeah, but in a crony system like we have, when we've gotten to the point that we all depend on various industries for the basic necessities, good for you can turn into bad for you if the wild price swings start breaking things. Enjoy it while it lasts.
You know, if we had any vestiges of free markets left in our DNA we wouldn't need to feel embarassed to say that.
NoDebt...
Let these words sink in to your head.
YOU have NEVER EXPERIENCED A FREE MARKET..EVER. THERE HAS NEVER BEEN A FREE MARKET IN YOUR LIFETIME..unless you are over 80...over 90???
Most likely you will not enjoy a Free Market in your lifetime.
The Federal Reserve Bank has ENSURED THAT OUTCOME.
It is a MYTH.
It is a Hopium Pipe Dream.
It is a Dream Away.
It is not reality. It hasn't been reality. It will not be reality.
It is a FANTASY. Free Markets happen in Fantasyland, a suburb of Disneyland, otherwise known as JAIL, a jail of your own mind.
Read what this jerk had to say, what Marriner Eccles testified to in US Congress.
These statements were made during hearings of the House Committee on Banking and Currency, September 30, 1941. Members of the Federal Reserve Board call themselves "Governors." Governor Marriner Eccles was Chairman of the Federal Reserve Board at the time of these hearings:
Congressman Patman: "How did you get the money to buy those two billion dollars worth of Government securities in 1933?"
Governor Eccles: "Out of the right to issue credit money."
Patman: "And there is nothing behind it, is there, except our Government's credit?"
Eccles: "That is what our money system is. If there were no debts in our money system, there wouldn't be any money."
Congressman Fletcher: "Chairman Eccles, WHEN do you think there is a possibility of returning to a FREE and OPEN Market, instead of this pegged and artificially controlled financial market we now have?"
Governor Eccles: "Never, not in your lifetime or mine."
OK, let me be the first to critique you and your training of your son re economic issues.
Everyone knows as industries are killed and the employees furloughed, (so much nicer than canned), the Keynesian government and EBTs step forward and make up for the change.
That only leads to the fed coming up with a new chant. "PRINT MUTHAFUCKA PRINT MUTHAFUCKA PRINT MUTHAFUCKA PRINT!" The question is, how close to the plebs will the helo drops be this time.
It is good for the 98%. the 1% may see their paper wealth erode, and some oil workers may lose theior jobs, but everybody else sees a benefit. Not to mention UPS, FedEx, airlines etc. Economies are dynamic with winners and losers being created all of the time. Why such hand wringing about a blip in the price of oil? There is virtually no change in the universe that is "good for everybody".
Low prices are not supposed to be good for everybody.
I would tell my son: "Losing a job does make a man useless. He can always work on the farm."
<<"hey dad, if gas prices keep going down like this won't the workers start losing their jobs">>
If you want to teach your son to be his brother's keeper, that is fine. Tell your son: "I would gladly pay the higher prices for gas but the damn feds keep letting the cheap oil in!" Perhaps re-phrase the problem by pointing to the source: borders. Your role as brother's keeper can extend beyond the gas station to meet common ground.
I do not believe workers MUST lose their jobs for us to live well. Cheap imported oil is like free sun light.
Truth be told, I would also show my son how the poor people working on oil rigs in the desert are slaves. That would teach him to be grateful.
$200? Those whores debase and demean themselves on international television for a lousy $200?
whore = does it for free
prostitiute = $
no need for 200$
Slut or skank is free.
Prostitute,or wife, costs money.
Agree with W C Slut or skank is free.
ok
the sluts and skanks on cnbc..........................
Wrong. They are getting paid by CNBS $200...As Gerald Celente says, they are Presstitutes.
"Washington, we got a problem."
What is astounding is that when gold lost 30%, gold miners cratered +50%
When oil crashes +50%, XOM loose 10%
that's because the real money in the US oil industry is refining vs. production... don't believe me? exhibit A: Valero
So, if it is true that Saudi is purposely pushing down the price of oil, wtf is our admin letting them sabotage US markets?
The Sauds aren't pushing down the price of oil. They cant influence oil in this manner, but they are a good scapegoat and it makes them feel important. If you believe that horse shit, I have some penny stocks you need to look at. This is total demand destruction and margin calls.
Ron Insana is the worst of them all on CNBC !
Its just going to eliminate a bunch of high paying jobs...who needs that when you can have part time retail work at minimum wage...
lower oil prices will have a general deflationary effect on the price of most american goods and services.
Think about food. A lot of the cost of food is related to the cost of energy.
The price of housing will drop if oil stays down long term.
This trend of lower prices all over the economy will lead to americans deferring purchases, vacation, and other expenses. They will wait for more drops in prices of things.
This scares the power that be. They might start buying oil and storing it.
...This scares the power that be. They might start buying oil and storing it.
Oil storage AIN'T CHEAP.
Cushing Terminal. During 2009, we will begin construction on additional crude oil tankage at our Cushing terminal. The project will include the construction of three 570,000-barrel tanks with the option to add a fourth tank during construction. This expansion is supported by long-term customer commitments. The estimated cost of construction is approximately $46 million.
If you think you can build a storage tank or tanker for a one time profit then GOOD LUCK TO YOU! (You MIGHT be able to lease something for a few months [/SARCASM])
the central banks will start buying oil and BURNING it.
a much more likely scenario imo
When the World is awash in Oil then we will go to War to consume it.
Nations do not field Modern Armies and Navies without Oil.
Cheap, abundant Oil is that which allowed for World War II and the consequential destruction.
We embargoed Japan of Oil in 1941 and her response was War.
The most likely scenario is War.
Trade Wars, especially when concerning Oil, turn into Hot Wars.
Being an industrial coatings contractor for big outfits such as Exxon, BP, Marathon & working with the big tankies (Matrix/Buckeye/etc) the est. 46 million for 3 tanks (15 mil / tank) is a little on the low side. Due to Union agreements coupled with union wages/bene's ever increasing, the total cost/tank is more in the ball park of 17.5 Mil/tank. Furthermore, the Painting/Coating price tag for one tank is ~2 Mil/tank. The caveat here is mark-up is typically 40-60%, has been this way since I started.
All that being said, the Kinder Morgan/Enbridges' of the US (tank farm operators leasing tank space) are fast tracking/accelerating work for 2015. These guys are making hand over fist leasing tank space. The service life of a tank (structurally speaking) containing crude is at least 35-40 years. Our company Re-coats tanks every 10-15 years @ ~$800,000. Aside from that, there is very little upkeep.
To your point Buzz, yes the storage is not cheap, but you have to keep in mind the relationship ties between the big oil and tank leasers. They are unable to function without each other.
2015/2016 in the Storage Tank world is bullish... Especially with Keystone looking more and more promising.
Annnd that equates to a few hours worth of US oil consumption.
"Think about food. A lot of the cost of food is related to the cost of energy." -- Yes, but this takes time to trickle through the system. Moreover, have you been following diesel? It has NOT dropped that much, so don't hold you breath.
Yes. I think I will defer all of my food and gasoline purchases for the next 3 months.
FYI... Here, in the real world, many of us (the lower 70%) quit buying non-essential purchases (anything not needed for survival) several years ago.
Aren't those spending figures a bit erroneous. Why would lower gas prices produce more spending ? They might produce more spending in other areas of the economy. So, there may well be more spending on food or leisure than previously.
That doesn't alter the other figures, but it seems strange that any economist or politician would imagine lower prices could ever increase spending. Only higher prices, greater income, necessity or reduced desire to save can do that.
I saved $12 filling up my tank this week, then went to the grocery store and spent $2.00 MOAR than last year on milk, $2.00 MOAR than last year on butter, and $8.00 MOAR than last year for two steaks.
You can buy one stick of butter where you live?
yeah think of what your life would be like if you hadn't saved that $12... man, some people bitch just to bitch
Wall Street and the Fed hate deflation. Actual living human beings who are not psychopaths connected to a free money spigot, not so much.
Deflation will kill the Fed and Wall Street. It's not so much that they like inflation, but rather that it's necessary for their survival. They're fucking parasites that sustain themselves off of seigniorage.
inflation is tax on poor and debt of rich, they like inflation
Huh ? .... Tiffany non-GAAP's itself to a 1% downturn in worldwide revenue for the Holidays ....
http://finance.yahoo.com/news/tiffany-reports-holiday-period-sales-120000465.html
When should we expect goldman to ask for yet another bailout?
"Ask".....Lol...
How do you know they haen't?
Was Cronmibus an illusion ?
LOLZERZ
Looks like Goldman is buying up crude. Prices will need to rise soon, cue the "low oil prices are bad" bullshit.
cue the (heavily insured) fires is more likely
With (still) unlimited free money available from the Fed, I am still suspicious of Goldman -- and will always remember their call for $200 oil when oil was $140, followed days later by a massive collapse in oil prices. This feels like the same 'blood from a turnip' call by Goldman, such that the best move is to not do what Goldman says, but to do what they are doing (which is probably buying oil and oil stocks). I see this as a blow-off bottom, and bought my first oil major stock in over 3 years. The S&P call by Goldman is also suspicious, and I can't tell whether they are now short (unlikely) - or are simply setting up the ECB or Fed to pull the MOAR-QE handle.
They were calling for $150 oil last year and in 2013.
Make of it what you will.
What, wait...last week an article proclaimed a drop in energy/oil/gasoline prices would not spur the GDP as it was a zero sum game. This week now you are saying dropping energy/oil/gasoline prices are causing the GDP to drop. These are contradictory narratives so the editors of Zero Hedge need to make a choice here, which is it? Because you can't have it both ways.
I smell a cover up, Obama has been giving happy talks about how the economy is going gang busters, the ISM has been supporting that narrative based on the liberals bitterly clinging to the Animal Spirits theory. Now we are seeing the groundwork laid to excuse this failure of the narrative by blaming dropping energy prices.
Distillate consumption has GONE DOWN recently as indicated by the EIA. Distillate consumption is primarily transportation, i.e. movement of retail and factory goods to consumers. IF Distillate consumption is going down, that indicates the economy is going down.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WDIUPUS2&f=W
Goldman makes it's money off the stock market (a sector of the economy), not the whole of the GDP, the two are not the same. That oil prices are going down and in turn will put downward pressure on the stock market via oil/energy stocks is bad for Goldman and their ilk, but not bad for the economy as a whole. Don't conflate the stock market with the economy as they do not always go in sync. IF you believe the economy is a zero sum game as in last week's article then you would interpret Goldman's fears as a regime change in economic market forces from that of financials to other sectors of the economy which is BAD for them and bad for traders in general.
What we have here is a general slowdown of the world economy as indicated by dropping Exports and Imports last quarter. You are confusing cause and effect, the drop in oil prices are an "effect" of dropping world economic activity, they are not the CAUSE of dropping world economic activity. You would understand that simple truth IF you believed in the Laws of Supply and Demand. Are you a Socialist or a Capitalist? Pick one or the other.
Interpol just charged former Ukraine President Yanukovych of , "Malversation". An unheard of word in English as it's a French derived word, so maybe that French IMF bloke is behind it (the darkie with the white hair) which means:
Definition of malversation in English:
http://www.oxforddictionaries.com/definition/english/malversation
noun
[mass noun] formal
Corrupt behaviour in a position of trust, especially in public office: a charge of malversation
More example sentences
The court said she and her three associates ‘were acquitted of the crime of malversation for insufficiency of evidence to prove their guilt beyond reasonable doubt.’
In 1801, as 1st lord of the Admiralty, St Vincent prosecuted an inquiry into theft in the dockyards which contributed to Lord Melville's impeachment in 1806 for malversation of funds.
I've seen, as have we all, theft, fraud, intimidation, malversation.
----
The US Congress may be in a spot of bother here ...
I am waiting for some court to indict Nuland for her mal-conversation when she said : FU EU.
I suppose she could always sing : I cain't get NOOOO SATISFICATON, and I TRIED, and I tried!
There are attenuating circumstances for mal-conversation from a frustrated woman alone in her 5 star hotel without boogie nights in Kiev.
JK Rowling just posted one about Rupert Murdoch's twittering about "mussis being collectively responsible about fanatical acts by Jihadists"...She said : If that is true then as a born christian I will auto-excommunicate myself for the Catholic church's past crimes.
Some wacky response to mal-conversation by olde farty from Foxy news!
when will the central banks start buying oil and BURNING it?
So much hopetimism among oil bulls here, combined with 200% faith in central banks. What could go wrong?
I am in cash.
And the central banks have something called a...."printing press."
Yeah because every trading desk in the world (except GS and JPM) were long crude and now they are about to be margin called, bitchez!
They finally realise it is hurting their loans to the oil companies. Well, they can print and buy back in the cheap.
Can't they just order some pipelines to be blown up to correct this problem.
Well you usually get this kind of market call - right at the beginning of a big price drop - to let Goldman and JPM finish their switch over from bear to bull. Once they complete the bullish oil conversion -- THEN you will see pipelines blowing up, Israel rattling their sabers against Iran, LIberian rebels in action, oil spills, oil barge accidents, refinery fires, and anything else it takes. GOLDMAN is NOT going to pay its traders ANY BONUS if they hold Long S&P positions all year while the S&P drops 10 to 20%. So that is the ONE THING you cannot expect from either Goldman or the markets.
They are starting early - Kuwait ports closed for a few days because of 'weather' and Marathon Oil has a refinery fire in Illinois.
Who really give a shit? It's all spin.
they say one picture can tell a story
https://twitter.com/EdConwaySky/status/554662661670322176/photo/1
"The bad news is that contrary to conventional wisdom, as even Bank of America and Goldman now admit, sliding crude prices will have an increasingly more negative impact only not on economic growth but S&P earnings... something we said from day one."
For longer than that you have said that S&P earnings and buybacks are not economic growth. For even longer than that you have said that malinvestments need to be cleared out before real growth can begin. Why are you whining when we finally get to the clearing out part?
It's about time to start my position in UCO. Think I'll start buying today near the close. Prob the best investment to make over the next 2-3 years imo
When you finally see BEARISH calls being made AFTER a 50% price correction -- it is usually a sign of a pending reversal.