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Oil Or Stocks - Will The Market Representing The Real Economy Please Stand Up!?!
Submitted by Chris Hamilton via Hambone's Stuff blog,
The first chart is global oil production, by month, based on latest EIA data. 2014 saw significant production increases after fairly flat production in '12 and '13.
source, EIA
And just so we're clear where nearly all the production gains came from...check 2005 and note global production (x-US / Canada) barely rises on the spiking price...but US / Canada production rockets 7mbpd over the period.
source, EIA
A close up of US / Canadian production (below).
source, EIA
The below chart highlights the falling consumption in 2014 (demand) of the 34 OECD advanced economy nations despite larger total populations and trillions in stimulus and new debt.
source, EIA
But advanced economy declining demand is nothing new and some (i.e., Italy, Japan, France) have been showing declining consumption since at least 1980!
So, global production is up and advanced economies demand is in long term decline...the below chart highlights the BRICS oil consumption is still growing...but the rate of BRICS oil consumption growth is inline with periods of global recession?!?
source, EIA
A quick snapshot of global production increases (yoy) vs. BRICS (yoy) consumption increases below. BRICS demand has been the driver for greater global production...'til now?!?
source, EIA
The below chart is the same global production change (yoy) as above but a highlight on China oil consumption change (yoy). China's $21 trillion quadrupling of its credit bubble from '07 til now has been driven by real estate...but in the last year, China's real estate prices have fallen and mortgage driven credit is slowing with the leaking bubble. Could China's economy be looking at an outright contraction in oil consumption in '15?
source, EIA
The above charts clearly disagree with the narrative equity and real estate markets have any linkage with the economies present or future health. The above charts clearly indicate global advanced economy plus developing economy demand is waning akin to levels typically seen in recessionary periods.
The chart below is a reminder real estate but particularly equity markets are currently off in their own world and not supported by growing employment, wages, or savings...employment and slow growing wages seem to agree with oil. Stocks and real estate are simply monuments to perpetually "cheaper" money.
Employee Source, US Bureau of Labor Statistics; Salary/Wage Source, US BEA; Real Estate Source, Federal Reserve System, Z.1 Financial Accounts; Equity Source, Wilshire Associates
Equities are supported by cheap money encouraging massive corporate buybacks and very favorable corporate taxation, as previously explained here. http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-35-taxes.html
In direct opposition to equity markets are decelerating US population and jobs growth, declining full time jobs (replaced with part time jobs), ramping debt and unfunded liabilities growing far faster than economic activity and taxes to pay for all of it.
Total Debt Source, 2013 OASDI and Medicare Trustees’ Reports. (pg. 183); Population Source, OECD; Employee Source, US Bureau of Labor Statistics; HHNW Source, Federal Reserve System, Z.1 Financial Accounts; Salary/Wage Source, Wage, GDP, & Tax Source, US BEA
But who should you believe...record stock market valuations and consensus spouting, highly paid economists who tell you all as is well...or oil, negative economic indicators, and your own eyes that this is just one more artificial boom desperately trying to run from the inevitable bust?
* * *
Be my guest to go through my previously posted book, Fundamentally Flawed, freely available online at:
http://econimica.blogspot.com/
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Congrats, Hambone! Anyway, I always trust highly paid economists. It's the Colbert "truthiness" thing.
The closest thing we have to a real market is the black one
It's an interesting plan. Not sure it is a good one, but I actually see what they have done, with the place.
They are trying to take the chance to change top level reality.
" we are taking you thru a vulkan mind meld and you will realize that the markets will go whever we desire. Get used to it bitchezz"
Ya can't fix stupid and you can't fight that big hammer floating above your head.
How soon we forget. BDI! BDI!
Easy money doesn't follow analysis.
Market? Real Economy?... What are these words?...
Perhaps I'll find some answers on this thread...
http://www.zerohedge.com/news/2015-03-04/imf-director-admits-greek-bailo...
Or maybe the Obamacare thread?
A market & real economy is sure to exist somewhere? right?
Oil stocks, that's my final answer.
IMO, it's just the 'Oligarchs R US' (of the world) getting ready to park their masses of fiat into real assets, as the Reset Cometh ever closer.
To them, it's not being on ZeroHedge.net, but in the AllHedge.biz
These days, when everything is being manipulated and cooked, the only sane & rational response left (to those outside the 0.1%) is to proceed independent of Trust, and to proceed on Principle. Therefore, I’m all about Mitigating Risk and Hedging my bets.
Kirk out.
So is it time to buy beaten down oil equities???
Not even with your money.
I think we are about to get the final bowel evacuation of the US economic corpse.
The frenzied war drums means the end is nigh,at last.
The conclusion that there will be an inevitable bust is certain to be true. But if I hunker down now and it doesn’t happen for another 5+ years I won’t be able to ride the bubble and accumulate additional fiat with which to buy even more prepper stuff. Buy the dips. Money moves the markets and there is plenty of it at present. Predictions of economic decline alone won’t cause markets to go down with no/low interest rates where there are few investment alternatives available.
From '07 til Q4 '14...global debt grew $57 trillion. This was amazingly just $2 trillion more than the $55 trillion created from '00 to '07...but as a percentage it was a 40% increase vs. the 63% increase over the '00 - '07 period.
The '00-'07 period growth in credit / debt was driven by households and Finance. The '07 - '14 period was driven by government and corporate debt taken at record low yields.
'07-'14
China and it's housing bubble created over $21 trillion new debt, advanced economy governments stimulated to the tune of $19 trillion...and the rest of the world the other $17 trillion. But ominous warning signs should be flashing about now. China's housing driven bubble and mortgate debt looks to be losing steam, advanced economy governments are in deep debt and running into declining rates of debt creation (US deficits down to mere half trillion annual deficits rather than nearly $2 trillion in '09, '10), and (God forbid) if corporations sense rates can go no ZIRP'ier or NIRP'ier and cut off new bond issuance or debt creation. The rest of the world sensing softening of demand may stimulate and/or may pull in their horns.
But net / net, without this global credit creation (increasing the debt)...well, things like consumer demand and commodity prices would collapse, shipping indexes tank, and global economic activity start spiraling.
If any of this sounds familiar, perhaps the long feared deflation and depression are finally overwhelming central banker and government attempts to avoid the inevitable.
Maybe, maybe not...but it sure looks like the global flow of credit is decelerating...and maybe precipitously, baring all the excess capacity of nearly everything.
yay for simple little charts that make sense
Agreed! A few good charts are the antidote to tons of BS.
The only market that represents the real economy these days is the one down on Main St. It's indicators bear absolutely no resemblance to the manipulated or outright fabricated shit coming out of what most people here refer to as the 'markets'.
It's where normal people go to exchange money for goods and services, and in much of the world it's a pretty fucked up place at the moment.
LORDY....just imagine having bought futures contracts 6 or so months out as a HUGE diesel or jet fuel user- when it was at $80....
hahahahaha...youre fucked.. Pay up bitch the bill is due...American Airlines, et al...
So funneling all fiat into one asset class, (US, stock's) (China, housing) while real earnings for 80% of the population declines, is slowing down monetary momentum. Thank god banks can pretend that all those loans will be paid back, or just print money if they're not. Think its bad now, its probably going to get more consentrated and worse, and I'm an optimist.