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The Biggest "Hamilton Oil Shock" In History
Slowly but surely, the narrative that plummeting oil prices is "unambiguously good" for the economy is fading into obscurity, as reality is starting to emerge. For the latest capitulation we go to the Bank of America chart of the day which shows that the current Hamilton Oil Shock is now the biggest in history, surpassing even the Lehman collapse.
From BofA Chart of the Day:
Hamilton oil shocks: Although historical comparisons are often imperfect, it is useful to look back at prior episodes of oil price shocks. In order for a move in the price of oil to qualify as an episode, there has to be a significant deviation from trend. We use the approach developed by Jim Hamilton, which defines oil price shocks as the difference from the three-year moving average. The most cautionary episode to today was the 62% drop in oil prices from November 1985 to July 1986, although the Hamilton measure is much smaller. Similar to today, most believed this would prove to be a boost to GDP growth. Indeed, the consensus was forecasting average 2.3% GDP growth to increase 0.3pp, but it actually fell 0.9pp (based on the as reported GDP data, third release). This downward surprise continued for three quarters.
This time won't be different, but like then, we will need to wait until the revised-revised-revised GDP data before it is finally apparent.
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ZIRP/NIRP dominos are falling...
well we might not have to deal with 'plug-in' cars anymore .. http://hedgeaccordingly.com/2015/01/the-potential-doom-of-cheap-oil-plug...
i really do love reading "capitulation" in Tyler's posts. it tells you more than all the charts in the world ever will.
the only question left is: 'who is next to capitulate on their long held belief this was sustainable?'
"And then came a sound. Distant first, it grew into castrophany so immense it could be heard far away in space.
There were no screams. There was no time.
The mountain called Monkey had spoken.
There was only fire.
And then, nothing."
https://www.youtube.com/watch?v=CX-hPFFwWIk
Clearly this Hamilton character is a trouble maker who needs to be put in jail. Just like Jon Corzine.
Oh wait...
Run for the hills! We're all gonna die from an over-abundance of cheap energy!
You would think that of all places where the long-awaited 'bust' from a massive mal-investment of capital would be cheered, it would be ZH. But no.
the only thing I am shitting myself, is that crude will recover. Just look how much we pay at the pump now. , SEE HERE => http://bit.ly/1B4K0wk
I am saving about $100 a week. Its crazy! one of my friends called, and said they filled up at an independant and got $1.00 holy hell.
They manipulated it down, get us all wrapped up, and exciteted, and then whip the prices right back UP, faster than they come down. This is evil, but I am scared.....
I am off to fill up some gas tanks, before we see HUGE INCREASE in prices. :-)
if you want value it is tough to beat a 40mpg car and $1.80 gas.
Especially if you stole the car. Not so much if you financed it through Ally Financial for 96 months.
At some point they're just going to publish the GDP/Labor stats they wanted first time around and never revise them.
Oh golly gosh! But but but but, if they did tha then just think of all the unionized goobermint employees who'd have no work to do revisisng already fundamentally wrong made up useless numbers that need revision to support the narritave.
I mean, nothing could justify government workers being paid to do nothing now, right?
And yet stocks will all be printing green tomorrow on Kitco.
What about this one 1979 Upward Shock, Note to self. All it will take is a middle east skirmish and with Fracking gone, oil can skyrocket.
The 1979 (or second) oil crisis or oil shock occurred in the United States due to decreased oil output in the wake of the Iranian Revolution. Despite the fact that global oil supply decreased by only ~4%, widespread panic resulted, driving the price far higher than justified by supply. The price of crude oil rose to $39.50 per barrel over the next 12 months and long lines once again appeared at gas stations, as they had in the 1973 oil crisis.[2]
As with the 1973 crisis, global politics and power balance was impacted. OPEC lost influence. In 1980, following the outbreak of the Iran–Iraq War, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. After 1980, oil prices began a 20-year decline, eventually reaching a 60 percent fall-off during the 1990s. Oil exporters such as Mexico, Nigeria, and Venezuela expanded production; the USSR became the top world producer; and North Sea and Alaskan oil flooded the market.
A 1980's US recession was triggered. Oil prices did not return to pre-crisis levels until the mid-80's.
Gold peaked at 800 dollars an ounce then too.
We have a lot more debt this go around and prices are far higher.
Any "demand failure" (gold, silver, oil) could send a huge shockwave through the debt markets unlike anything seen back in the 70's.
Where is all the liquidity again?
We don't even have a recovery yet.
Yes, this bodes ill for gold, the one gram per barrel ratio has rarely been sustained without a big move one way or another, in this case, if oil won't come back up, you are looking at $500 gold for a long time to come.
The BIS will ensure that all stats are properly reported (dealt with) in a timely manner.
Those [alleged] Russian "spies" they caught in nyc were probably after those BIS calculations since it's Top Secret how the BIS equate and report roses and tulips while the economy is realistically weeds and petunias.
Lindsey Williams long ago ... https://www.youtube.com/watch?v=fbwMOvV6ctg
Cheap energy is good for the economy, when you have one....
JFC
Please join me in shedding a tear for another metric and ZH article declaring just how bad this decline is.
We get it:
Low oil prices bad
$80-$100+ good
It'll come back. Get over it. Bookmark these fuckers so you can refer back to them in 12-18 months and give us all the obligatory "We told you so"
A once seemingly prescient site losing sight of providing the meaningful content that made them relevant.
Don't forget to click on the ads, Friends. Please click on and ad before you depart.
You're not gonna get much love for that, but it's a fair comment.
Speaking of bookmarking.... Go back 12-18 months ago from today and you'll read a lot of articles decrying the illusion/mal-investment of fracking, shale drilling, etc. All the wells were supposed to dry up within a couple weeks or months.
This is an article about the ongoing mainstream narrative, and indirectly market sentiment, dumbass. Something that is always relevant and something that ZH has done since their beginning.
BP to cut Houston jobs, reduce US Gulf business http://www.hydrocarbonprocessing.com/Article/3422508/Latest-News/BP-to-c...
This announcement follows job cuts at Houston-based oil field service giants Schlumberger, Halliburton and Baker Hughes, which have announced a combined 17,000 employee layoffs in recent weeks.
By the look of it a Hamilton downward shock only lasts for about three months. I am off to the gas station with a bathtub.
Oil was in a bubble. All the insolvent Investment Banks believed it was a path to solvency again. They were wrong again.