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Oil and Coal Indicate the Global Economy is in a Free Fall
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 ALL of the bull market’s gains (the green line represents the pre-bull market low). For all intensive purposes, the last 13 years were a wash.

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 took out this line AGAIN a week or so ago. 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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The collpse in the overall ww economy is actually pretty easy to understand. The world has been printing crap money and pushing it into the economy.. There was no demand. The bubble we have seen over the last 15 years has been based on the Chinks building their ghost cities. This phony money was used to build their phony cities. This is what created the phony demand for commodities. Once prices went up on phony demand, the world responded by providing resources via mining, etc. to bring these commodities to market. We dug a hole. We are now standing in it. We pulled resources forward to meet a phony demand and now the phony demand has collapsed and we have a glut of everything financed by cheap money and credti to anyone with a pulse. People have tapped out their demands to buy cheap chinese shit on free credit and are starting to smell a rat. They are hunkering down as they watch businesses collapse, malls turn into ghost towns and nothing but part time jobs while masses are getting pink slips. The cat os put pf the bag and a reset is on its way. European socialism has failed. Now, all we have left to do is watch the euro pussies whine a cry while their potemkin village collapses. There will be short temr pain. Hopefully we will be able to get back to normal and start building weapons of mass destruction again. So, there it is. The world has a credit card bill that is due and everyone is both the lender and lendee and everyone is going to take it in the shorts. Even the welfare cheats.
So much for the dumb muslim nigga's TBTF recovery theory
This is not a matter of the overall world economy. For better or worse, depending on your perspective, this is a matter of environmental politics. Worldwide as a matter of political and PC mandate, coal-fired electrical generation plants are being replaced with other forms of generation, particularly natural gas and renuable sources. It is what it is, but what it is not is an indicator of the world's economic health.
Uh.......,,um........wel........ok... There is no replacement energy. They have just been busy killing off coal fired power plants here in US because of european homos selling the gay global warming crap made up by gay eurofaggot homos. Americans are not buying the bullshit, but political class still strying to kill it off. Not gonna happen. The worlds energy demands cannot be met with faggot euroqueer unicorn rainbow farts.economy just sucks.
technical voodoo charts mean nothing.
the us has created a glut of oil on the market and with falling prices the morons have decided that volume will make up for low prices.
saudi is pumping to fuck over the market again and will win the game... yet again
china is on a massive efficiency campaign and we're seeing coal use dropping.. which will fuck the aussies. solar and wind have gone up and all those nifty new trains and subways are running on electricity. coal plants have been shut down and are being replaced with renewables, high efficiency systems and nuclear. The biggest users of electric are being consolidated into more effecient plants. pollution is now a main target as well.
free fall would be if none of these things were happening and demand was just dying off. there's a fucking GLUT of the shit in the market and demand has fallen slightly due to alternatives and efficiency. Deal with it... fucking morons.
Now its happening, after all the 0% financed expansion for 7 years. Should be the most exciting bubble since ... ever.
Could get so bad all the miners worldwide get nationalized to maintain the peace for the next years (or forever).
i'm sort of baffled by all these macro trend analyses that ignore the geopolitical issues... like, what about the prospect of the collapse in oil prices being engineered by the saudis (or whomever else?) while i don't know if that alone is the whole story (assuming there's merit there, and i'm inclined to think there's at least some), looking to just the data-plots seemed a bit one-dimensional.
The fear porn stand will always have buyers.... "death & sex" have been the subliminal best inducers of all time.
See "The hidden persuaders" by Vance Packard
The play could be the same as back in teh 60's when oil fell, and then rallied for years after. CRUDE is going to be a buy of the century soon.
but while that play could be happening. Here is an idea.......
What about yesterday, GOOGLE had the biggest 1 day up in history. HOLY MOLEY!
http://bit.ly/1CSC7Rq
Does this remind anyone of the tech boom back in 1999 – 2000? hmmmm?
Phoenix is spot on with the charts...and I believe, the analysis.
ALL of this, in one way or another, is either a direct consequence of shortsighted western corporate outsourcing, or a warping effort to deal with those consequences. You cannot outsource the means of western middle class wealth creation for the last 40 years, and not create serious damage to the global economy. The major shocks of 1999, 2002, and 2008 were clear warnings that major economic damage had already occurred in first-world economies, AND THAT, the looney asset-inflating macroeconomic monetary policy was NOT restoring ANYTHING.
The major reason for oil, coal, and other commodity demand declines is the lack of new demand growth where it was expected: in those nations (China, et al) that received the jobs and industries the west outsourced.
Mark it down. The annuls of the economic histories of this period, yet to be written, will clearly bear this out.
This was a preventable disaster. It could've been halted a number of ways, long ago.
Now, it's too late.
China and the other receiver nations can't support commodities to feed factories producing things WE can't afford to buy.
It is just that simple.
EVERYTHING ELSE are consequences of that inevitable eventuality.
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Damn good thing the real economy doesn't have any effect of stock prices and if anything the relationship is inverse these days or I'd say buying Facebook at 98$ A few hours ago was a huge mistake... Fortunately we have detached ourselves from such barbarous relics as fundamentals or macro economic date and FB is going to 1000.
As an aside, remember last year how they said sustained prices below 90 would cause cascading defaults and systemic collapse?
Well here we are now @50; still waiting.....
Macroeconomic effects usually take 6 to 12 months to occur...now we are seeing the early effects.
Wait until January 2016...should be horrorshow.
I like your overall argument, and I agree with it. But I am also skeptical that $30 Oil is here to stay. People are not riding bicycles out there. Everyone is still driving their cars, and the global population is going UP. We are not living in caves.
It would be nice if the Powers-That-Be did something constructive, and reduced the leverage in energy trading markets. Try to allow the Futures market to become more stable. Avoid wild price swings, and discover free market prices more effectively. YEAH, I know that the big changes in price are not driven simply by leverage. But at this time we need economic indicators that are reliable, and oil the most essential price in the market (coal as well). This is the 21'st century, and we do NOT have the luxury to play the same kind of games with financial markets that happened in the 20'th Century. Otherwise - we will be living in caves.
NO NEED to tell you guys that Copper prices have plunged to major lows, and are threatening to go below long-term support levels. And also that the Baltic Dry Index is at generational lows.
YES, the Global economy is in the toilet, and the "great engine of growth" (China) has dried up. THE Nasdaq index is now buoyed up by only 4 stocks, two of which do absolutely NOTHING for the US economy (Amazon and FaceBook).
THIS is a pathetic place for the US economy to be.
Those people running the show need to throw in the towel and admit defeat. The previous generations who worked to make the USA great would be horrified - if they saw how things are being run today.
No man you have that all wrong .
I just read this in the National Business Review (out of NZ) :-
"Gold bugs have got into a jitter over the first rise in US interest rates in more than nine years.
The US Federal Reserve’s imminent move, which could come as early as September, triggered a price plunge last week in gold futures.
That fall continued this week as the US dollar continued to rise after Fed chairwoman Janet Yellen gave her strongest signal yet that the economy was nearing the point where a rate hike was justified."
That US economy is just so damned strong!
You see now ? :-)
The argument based on coal may be valid. But the analysis of crude oil makes no sense as an economic indicator since we all know that it is at the heart of geo-political manipulation.
Yes agree. However at some point if demand drops out entirely, then Supply and Demand will take over the strongest arguments and debate. It would take trillions to support all commodity prices during a deflationary spiral, and the political/fiat/artificial/financial support would eventually fall away (in any event).
Australia has to be in panic mode
Yeah right! Well, maybe . . . .???
http://www.breitbart.com/london/2015/07/17/green-fury-aussie-pm-tony-abb...
BHP, RIO Tinto, Santos, Origin Energy, etc are big time hurting.
I recently worked for both Santos and Origin (GLNG and APLNG projects respectively) so I got a birds eye view of what happens to a large energy player with high exposure to oil....in a nutshell - they're fcked. Mass layoffs and panic cost cutting.
Australia is going to hurt like no other with this supercycle downturn....and to top it off you have Sydney is a RE bubble for the ages. TBH, things have never really recovered from the GFC....low interest rates only thing keeping this place from economic depression.
I remember that article about the truckers there making more then the heart surgeons. I wonder how that's working out? Lots of those commodity-related workers bought [with almost no money down] $400k -$800k houses. Their TARP will be 5x the size of Hank Paulson's gift to merikan bankers. Oh yeah, better watch how those life insurance companies are going to survive given what happened to AIG here.
Gonna be a world of hurt there I'm afraid.
I accept that the recovery story is total nonsense. The entire world is now irreparably damaged by ever increasing central planning and the slow motion "shrug" of people who would otherwise be entrepreneurs and producers.
However, I can't buy $30 oil as anything but a possible short term overshoot from the collapse. While I understand the cost of production will fall during a collapse, I have a very difficult time believing cost of production can fall to $30 for any significant period of time. If the oil price was to collapse to $30, unabashed hyper-printing would begin, raising cost of production and boosting the dollar price of oil along with everything else.
Levels of desperation. If sellers are desperate $30 or less oil is possible. How likely is that? Don't know. Also $ is rising right now. Remember when the Euro was 80 cents to the dollar?
I'm not a member of the General Public. Did you print any copies for the "off grid" or the "private public"?
Again more propaganda for idiots here...you dont have a clue as to the fundamentals of oil and use it to advance your own agenda..your no better than the idiots who pretend economy is great.....demand is soaring and supply is waning yet the next media oil worry to drive prices lower is iran...BS
One of my adult children is a heavy equipment operator in a US coal mine. I sent a text last Thursday and asked how things were going. The reply was short and to the point, "I'm working everyday."
This %* Phoenix Capital has been fear mongering, and jumping around from issue to issue for as long as I can remember. It doesn't matter what the issue is, they've got THE answer for how people should invest. It doesn't matter what commodity or financial instrument is a tad below peak performance they use it as a means to put fear into people and get them to ask for financial investment recommendations. Phoenix Capital, your approach leaves much to be desired and you really aren't worthy of this website.
One of my adult children is a doctor in an emergency room. I tweeted at him the other night to see if he wanted to go Bonita fishing with me on my new boat. You know what he said? He said the Obama was making him work the next day, treating aliens that were injured by some fourth graders throwing rocks. Not mexicant aliens, mind you- these were real, live, outerspace aliens from the third galaxy over to the right of us.
If there is one thing I hate on this site, it is the phoney personal anecdotes.