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Two of the Most Economically Sensitive Commodities Suggest a Crash is Coming
If the foundation of the financial system is debt… and that debt is backstopped by assets that the Big Banks can value well above their true values (remember, the banks want their collateral to maintain or increase in value)… then the “pricing” of the financial system will be elevated significantly above reality.
Put simply, a false “floor” was put under asset prices via fraud and funny money.
Consider the case of Coal.
In the US, Coal has become a political hot button. Consequently it is very easy to forget just how important the commodity is to global energy demand. Coal accounts for 40% of global electrical generation. It might be the single most economically sensitive commodity on the planet.
With that in mind, consider that Coal ENDED a multi-decade bull market back in 2012. In fact, not only did the bull market end… but Coal has erased virtually ALL of the bull market’s gains (the green line represents the pre-bull market low).
Those who believe that the global is in an economic expansion will shrug this off as the result if the US’s shift away from Coal as an energy source. The US accounts for only 15% of global Coal demand. The collapse in Coal prices goes well beyond US changes in energy policy.
What’s happening in Coal is nothing short of “price discovery” as the commodity moves to align itself with economic reality. In short, the era of “growth” pronounced by Governments and Central Banks around the world ended. The “growth” or “recovery” that followed was nothing but illusion created by fraudulent economic data points.
We get confirmation of this from Oil.
For most of the “so called” recovery, Oil gradually moved higher, creating the illusion that the world was returning to economic growth (demand was rising, hence higher prices).
That blue line could very well represent the “false floor” for the recovery I mentioned earlier. Provided Oil remained above this trendline, the illusion of growth via higher energy demand was firmly in place.
And then Oil fell nearly 60% from top to bottom in less than six months.
As was the case for Coal, Oil’s drop was nothing short of a bubble bursting. From 2009 until 2014 Oil’s price was disconnected from economic realities. Then price discovery hit resulting in a massive collapse.
Moreover, the damage to Oil was extreme. Not only did it collapse 60% in a matter of months. It actually TOOK out the trendline going back to the beginning of the bull market in 1999.
This is a classic “ending” pattern. Breaking a critical trendline (particularly one that has been in place for several decades) is one thing. Breaking it and then failing to reclaim it during the following bounce is far more damning.
We’ve just reclaimed the line a week or so ago. But unless we hold here, Oil will be dropping down to $30 per barrel if not lower.
In short, the era the phony recovery narrative has come unhinged. We have no entered a cycle of actual price discovery in which financial assets fall to more accurate values. This will eventually result in a stock market crash, very likely within the next 12 months.
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Bankruptcies (PCX twice, James River), while the four largest publicly traded (ANR, ACI, BTU, WLT) American coal companies are trading as low as 1/2 of one percent of their stock prices from just 2 years ago. Much of this blood bath is directly attributed to the US Gov't putting its boot on their necks as an industry and source of cheap energy. We'll pay mightily.
I thought Water was one of the most sensitive commodities. We got a nice hour long downpour here in Pa tonight. You suckers out in Lala land eat your hearts out. The cornfields of Pa will be bursting with much corn this year.
Another stanza in the endless drumbeat of doom prophecy. Some day Phoenix Capital will be right, and will no doubt endlessly crow about that "call." And some day I will be right in my prediction that "sun is going to explode and consume the Earth and the solar system with it."
Dull.
" No one saw this coming! "
This item attempts to use the prices of coal and oil to make a point within customery economic analysis, when we all know that these price moves depended entirely on exogenous political decisions.
Please explain the sudden price discovery mechanism for oil....what was the trigger?
The death of the King of Saudi Arabia was the trigger
Kind of like all those metals stored in Chinese warehouses.
Please explain how the sudden drop in the price of oil was due to 'price discovery'.....what was the trigger?
End of QE in Oct. 2014.
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=crude+oi...
"Affordable" Care Act premiums to go up 25%-50% next cycle, so the recovery is here!
/s
N/A----the medical support needed for the gov't pentioner crowd is in place-- all others will stand in line--long live the apparatachik. The price is not descoverable thing-- but merely mandated punitive exercise.
Gov'ts are obsolete
Low oil pricing is directly correlated to the precious metal markets and needless to say how those markets are controlled!
Low oil prices right now are caused by Saudi dumping, intended to prevent Russia from reclaiming the territory stolen from her in 1991.
A fair price for oil, that would allow Russia to enjoy the northern European living standard she should have had decades ago, would be closer to $200 a barrel.
Using oil prices to predict a crash is a tad disingenuous because we all know that in a proper functioning market, supply is adjusted to reflect demand. This is not happening in the oil market as the Saudi dogs - despite low demand - have increased output to drag the price down to damage Russia and destroy the US fracking industry. Theoretically, this could happen at any time, even in a recovery and cannot simply be attributed to a forthcoming crash.
I believe CRASH II is coming, but oil is not currently the best indicator.
ITS.....ALL....LIES....
There should be a price Phoenix Capital should pay for all the false crash predictions. Something tangable and with time limits. Say something of the likes of .... If the markets don't crash within the next 6 months, the whole Phoenix Capital group has to walk butt naked down wall street, end to end.
Meanwhile enjoy their free news letters.
http://phoenixcapitalmarketing.com/special-reports.html
(They wouldn't even make the D list for the perp walk.)
Lighten up Alice
The crash has already happened.
Oil Derivatives have imbalanced the entire Global Derivatives Market into oblivion.
They have been trying to paper this over, and as they cannot, they are politically setting up Greece to take the blame.
Everything is fake. Elevated Stock Prices while there are no earnings to justify that?
This is the Tech Wreck, The Housing Bubble and a Currency Collapse all being brought together for the final crescendo.
Looking forward to September...
The Fed Print Print money, digitize currency QE begats Zirp, begats bogus stock market, THEN the derivatives try to correct the error. Well, well, how the mightly will FALL.
How much of a crash, huh huh?
Come on gold and silver will be king
I would go with "Doctor" copper and iron ore.
China's positioning for future, may distort pricing in the medium term.
China is stockpiling massive amounts of metals like gold and copper and all those strategic metals that are used in electronics and aircraft engine manufacture. When inflation returns and commodities soar, it will be a huge jackpot.
And the "when" you refer to is the point in time where manipulation ends and reality sets in. If China has the metal I expect she has, it not only will be a Jackpot, but a literal reshuffling of wealth, whereas the USD will be revalued in terms of metal held. For that reason and others, unless a revolution comes to pass, I fully expect more and more resistance on having an honest audit of the GOLD the USA claims to hold. More and more, I sense GATA will be fully vindicated. This fall when the SDR likely comes to fruition (or prepares for it) will be quite a time to be alive, spare if black swan WWIII diverts our attention.