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Government Influence Over Asset Prices Growing

Tyler Durden's picture




 

Submitted by Leonard Brecken via OilPrice.com,

Where most analysis on oil markets tends to fall short is on the depth of analysis vs. reading headlines and group think, the latter of which is heavily shaped by misinformed media and government propaganda.

The facts are OECD stocks have fell in October, not increased. That runs against the generally accepted belief that storage capacity is full and we are oversupplied by around 2 million barrels per day (mb/d). That suggests that the IEA is underestimating demand and grossly exaggerating inventory levels.

Further, the EIA has consistently overstated supply in its weekly data release, "adjusting" inventory up by seemingly arbitrary amounts. Now, according to Cornerstone Analytics, last week we find that the EIA is under-sampling small producers whose production is rapidly declining. Also, monthly production figures continue to be inflated. This conclusion from Cornerstone Analytics is noteworthy:

“On the USA, one point we will leave you with is that there appears to be some scope for the DOE to revise down American oil production figures for the past few months. Our sense is that the monthly survey numbers for production have ‘undersampled’ output from small independent producers whose output has been more negatively impacted from the activity fall-off as compared with the larger producers.”

The problem these days is that markets are controlled by people who don’t take care to delve deep into numbers and simply don’t question numbers being fed to them by media or government agencies. Instead they trade off headlines and care less about their validity because it suits their agenda, ideology or, even more likely, unconscious bias, reinforced by propaganda.

Between these imprudent trading practices and the fact that assets are being controlled by mad central banks pursuing a political agenda –makes it extremely difficult for those who do real fundamental research. In the end it lengthens the time horizon when fundamentals become accurately reflected in prices. It also begs the question of whether markets are actually free or not, as all rational thinking goes out the window.

What is more worrisome is the question of how deep governments are directly or indirectly influencing asset prices. As we stated in our last piece, it is clear that the Federal Reserve is doing both, and on a historic scale. The media’s role in moving markets has increased enormously over the past two decades. In the past the media was more subtle, but now so many outlets do not even hide their agenda or ideology.

Governments too morphed from influencing assets and corporate investments indirectly through tax policies or regulatory agencies such as the EPA, to what is now occurring through the Fed. However, we may have taken things one step further as now the Secretary of State is referencing influencing markets through the recent climate change agreement that passed. I first came upon this quote below via a Yahoo! Article, which struck me as odd given the direct reference to investors to liquidate investments in fossil-based energy, particularly at a time they are already being liquidated. On December 11 several high-yield bond funds announced restricted redemptions tied to plunging illiquidity and prices in high-yield energy. I believe this and concern over interest rates sparked a sell off in almost every asset class on Friday.

May Boeve, executive director of 350.org, an organization pressing financial institutions to divest from fossil fuels, also said the 1.5C reference was key. This marks the end of the era of fossil fuels. There is no way to meet the targets laid out in this agreement "without keeping coal, oil and gas in the ground," Boeve said. "The text should send a clear signal to fossil fuel investors: divest now."

Then we came upon this from Foxnews Sunday, where we have the Secretary of State, of all people, now directly referencing markets on how the accord “sends a clear signal to markets”.

So what is the conclusion? To sell energy and stop investing in it? The point is that there is growing evidence that the investor class better be wary of government’s heavy hand on influencing asset prices, directly and indirectly, as well as the growing detachment with fundamentals. There appears to be no end in sight, and the price for all of this meddling will be very high when reality finally sets in.

 

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Tue, 12/15/2015 - 11:47 | 6925906 order66
order66's picture

Just now it's growing? Dude, they've controlled asset prices for nearly a decade now.

Tue, 12/15/2015 - 11:50 | 6925933 LawsofPhysics
LawsofPhysics's picture

LOL!!!  Try 40+ years, some might argue over 100 years.

 

 

Tue, 12/15/2015 - 11:54 | 6925961 NidStyles
NidStyles's picture

When only the government is buying, the shooting will start. mark my words on this. 

Tue, 12/15/2015 - 12:18 | 6926044 nope-1004
nope-1004's picture

Not according to Marin Armstrong.  The market is ALWAYS right, no matter what.

Of course, if you're a convicted felon and strike a deal with .gov to run a fund influencing big money, then your out-of-jail card will say just about anything, however conspicuously aligned with .gov ideology.

Any non-felon who has been in the market for some time can see how horribly mispriced assets are and how unrealistically the S&P is levitating.  But good ol' Marty keeps slamming goldbugs when gold has only dropped 40% ish, yet is quiet about oil's plunge from $120 to $35, a 70% wiping.  Someone needs to start a blog about .gov whores and market steering dynamics.  Then the author will be able to do the same thing as him:  Post fake questions of adoration and correct calls (Dow 30,000?).

 

Tue, 12/15/2015 - 12:59 | 6926247 Victor von Doom
Victor von Doom's picture

+1 Spot on yet again NS. 

No point running the scam when no more suckers turn up. Time to dump the charade and just kill them and take their damn money.

Sounds like Obama to me - or Hillary. I wouldn't put it past either of them to order the open killing of Americans - cough, cough - I mean terrorists.

Tue, 12/15/2015 - 12:06 | 6926025 MalteseFalcon
MalteseFalcon's picture

The government is manipulating the facts about oil prices and oil reserves?

No way, man!

Tue, 12/15/2015 - 12:08 | 6926033 ebworthen
ebworthen's picture

Yes, it's called "Central Banking" and it destroys the price signals that individuals try to send every day.

It leads to the mis-allocation of resources and the destruction of:  pricing, risk, and the value of labor.  It benefits the elites and .gov while crushing the middle-class.

Tue, 12/15/2015 - 11:48 | 6925910 MrButtoMcFarty
MrButtoMcFarty's picture

First, we kill all the banksters.

Tue, 12/15/2015 - 12:18 | 6926089 Apocalicious
Apocalicious's picture

Unless you kill the politicians at the same time, there will just be another banker inserted.

Tue, 12/15/2015 - 12:30 | 6926124 Kirk2NCC1701
Kirk2NCC1701's picture

You 'kill' the politicians, by putting them on a short, voter-controlled leash.

E.g., 1. Term Limits of Public Service, 2. Election Duration and Spending Limits, 3. NO corporate or group contributions allowed, but only private citizen contributions, and 4. Entrance Exams given to all people seeking Public Office (with an 80% pass grade needed prior to running for office).  Having Open Primaries, with no Party affiliation needed, is an idea I've heard from a lot of people.

If you take the Time and Money opportunities out of the racket that is Political Office, you keep the wrong people out of elected office, since they will then seek greener pastures in the Private Sector.  Having the Exams, keeps out the well-meaning morons, who add no value -- no matter how damn charming and likeable they are.

Tue, 12/15/2015 - 12:43 | 6926197 markovchainey
markovchainey's picture

I think it'd just be easier to increase the number of pols.  Let's have 43,500 Congress critters and see how easy it is to buy enough of their votes.  Let's see how many laws 43,500 Congress critters can pass.

435 for 300+ million people is not representation.  43,500 is still not representation but it's closer. 

Tue, 12/15/2015 - 13:04 | 6926270 NidStyles
NidStyles's picture

Exactly. It's the same reason why the UN is defunct. 500 something people making choices that determine the lives of 7.5 billion. Absolutely ridiculous and a sham. 

Tue, 12/15/2015 - 13:06 | 6926261 NidStyles
NidStyles's picture

Why isn't political office a chore and handled like jury duty? 

 

It should be any time there is an issue to be voted upon people are selected randomly form the populace at a select percentage and the votes occur that way. 

 

Ban corporations as persons outright, and solve that problem outright. That a collective could petition for itself as an individual is simply communist from the onset. 

Tue, 12/15/2015 - 13:06 | 6926284 TAALR Swift
TAALR Swift's picture

"Having the Exams, keeps out the well-meaning morons, who add no value -- no matter how damn charming and likeable they are."

So, no W or Obama? Both of whom fooled a lot of people in both uni-party parties with their election charm.

Tue, 12/15/2015 - 13:02 | 6926259 Victor von Doom
Victor von Doom's picture

Not true. The pollies would just switch to the next biggest wallet in town to whore themselves to.

Setting up the bankster scam took a very particular type of scum - not run of the mill crooks at all.

Tue, 12/15/2015 - 11:53 | 6925946 arbwhore
arbwhore's picture

... and in other news... Polish 'Nazi' gold train a bust...

http://www.bbc.com/news/world-europe-35104117

Its Al Capone's vaults all over again.

Tue, 12/15/2015 - 12:04 | 6926016 nuubee
nuubee's picture

Don't be ridiculous, there is likely more hidden gold waiting to be discovered in some other as-yet undiscovered pile of dirt.

Tue, 12/15/2015 - 12:10 | 6926042 arbwhore
arbwhore's picture

I remember how "experts" were all over this when it happened as a pointer to how the market could become flooded with tons gold and the price would drop like a stone. When it all turns out to be nothing... not a word about it or any counter-reaction in the "markets". On to the next "hill" I suppose...

Tue, 12/15/2015 - 12:35 | 6926160 Temporalist
Temporalist's picture

Welcome to the Bloomturd, Marketwretch, CNBS world of gold "reporting" where only negative articles are published. 

Tue, 12/15/2015 - 11:54 | 6925958 Dr. Engali
Dr. Engali's picture

You mean the fed can manipulate the paper price of goods and services with an unlimited amound of fiat available to them? Do tell? 

Tue, 12/15/2015 - 11:54 | 6925963 Clowns on Acid
Clowns on Acid's picture

Yeh ... lets run the US Military on solar...

Tue, 12/15/2015 - 13:09 | 6926298 Kirk2NCC1701
Kirk2NCC1701's picture

And Wave Energy.  ;-)

Tue, 12/15/2015 - 11:57 | 6925982 buzzsaw99
buzzsaw99's picture

dissing the iea is easy they are useless as tits on a bull

kind of like this article. small producers? lulz:

http://www.zerohedge.com/news/2015-11-12/something-very-strange-taking-p...

Tue, 12/15/2015 - 12:02 | 6926003 Flounder
Flounder's picture

 

 

Hey, there are more purple loops in my Fruit Loops this morning.  Contagion, intervention, manipulation, meddling.  For fucks sake.

Tue, 12/15/2015 - 12:05 | 6926023 arbwhore
arbwhore's picture

Its when you start finding Lucky Charms in your Fruit Loops that you really have to worry.

Tue, 12/15/2015 - 12:13 | 6926024 michigan independant
michigan independant's picture

Author is overly educated with no sense of classical mechanics that distinguishes them from and us. The Air Force recently bought 11,000 gallons of alcohol-to-jet fuel from Gevo Inc, a Colorado biofuels company, at $59 a gallon in a program aimed at proving that new alternative fuels can be used reliably in military aircraft - once, that is, their pricing is competitive with petroleum, which now costs $3.60 a gallon. Never assume how fucked up the MIC truly are. Meanwhile the residue in the Tanks was denied we hear off hand. Taxpayers never had a chance since the list will be seen by that investor class. Private supply chains as the dinosaurs are picked clean. http://www.eia.gov/todayinenergy/detail.cfm?id=17271https://www.gpo.gov/...

Tue, 12/15/2015 - 12:14 | 6926072 Poundsand
Poundsand's picture

That wasn't due to a screwed up MIC (not that the MIC isn't screwed up), that was due to the crony capitalism that has swept our government.  Don't think for a moment that several congressman, senators, generals, hell probably even colonels at this point aren't heavily invested in Gevo and are making a killing.

It's now all about the government contract regardless of what agency or branch it flows through.  And it spells the end for our form of government, it's just a matter of when.

Tue, 12/15/2015 - 12:13 | 6926051 Imagery
Imagery's picture

TOTAL BS.  I am a US Private Small producer adn I am "Balls to the Walls" producing my wells, for different but without significance reasons, that US Big Fruadulent TBTF WS Portfolio Oil Cos are.  I need the CF to pay my bills just as the Public TBTF WS Shale Portfolio cos need teh CFs to service their debts.

This is all gonna end very very badly adn Oil prices will be down for literally years - barring a ME War.

For More of Real Story - JOIN HERE.

Imagery.

 

Tue, 12/15/2015 - 12:13 | 6926062 Hondo
Hondo's picture

I'm not buying this flimsy argument one bit....no facts, no data just talk...reads like a propaganda piece.

Tue, 12/15/2015 - 12:27 | 6926117 curbyourrisk
curbyourrisk's picture

This guy is talking his book and propping up who he represents.  No difference between him and the asshats in Washington

Tue, 12/15/2015 - 12:32 | 6926149 adr
adr's picture

So what is the conclusion? To sell energy and stop investing in it?

Actually, yes.

If you have no place to store what you bought, or a place to refine what you bought, or any actual way to use what you bought, YOU HAVE ABSOLUTELY NO BUSINESS INVESTING IN IT!!!!!!

$140 oil came about because thousands of new buyers for oil contracts showed up and constantly bid the price higher using borrowed dollars to speculate in a new venue. Then the algos got involved and the energy markets have turned into an insane computer controlled speculative game where the price can fluctuate 10%+ intraday on no news at all.

Like I have said before, you force delivery of oil contracts and the price plummets as 99% of the holders of contracts rush to sell because almost none of them have anywhere to store the oil they own on paper.

Commodities are essential to commerce and shouldn't be played with by armchair momo chasing idiots trying to make a fast buck on churning contracts.

Tue, 12/15/2015 - 12:54 | 6926231 LawsofPhysics
LawsofPhysics's picture

"Commodities are essential to commerce and shouldn't be played with by armchair momo chasing idiots trying to make a fast buck on churning contracts. " -- Yes, now what about too big to FAIL fucking bankers?

Please, fuck right off.

Tue, 12/15/2015 - 13:14 | 6926311 Kirk2NCC1701
Kirk2NCC1701's picture

LOL.  You make me (fucking) laugh.  Not that you're part of Samuel L Jackson's tribe, but I can't help picturing that guy delivering your lines, because he does it with such style.  I even like his TV ads ("What's in your wallet?") -- he's so damn likable, in a Pulp Fiction kind of way.

Tue, 12/15/2015 - 12:46 | 6926213 moonmac
moonmac's picture

PVF inventories are bursting at the seams as prices head lower. Ultra cheap raw material costs for steel products just means we’re tripling our production runs. First time ever the bank doesn’t want us to do inventory. The world is awash in commodity goods and it’s only getting worse!

Tue, 12/15/2015 - 13:28 | 6926368 Grimaldus
Grimaldus's picture

Is it possible that the Federal Reserve is staffed with true constitutional conservatives?

No it is not possible. I bet not one constitutional conservative in the entire organization as the FED does not even EXIST in the world of true constitutional conservatives.

So what is the FED staffed with?

PROGRESSIVES.

 

 

To have a crime, you must first have progressives.

 

 

Grimaldus

Tue, 12/15/2015 - 14:02 | 6926545 TheDanimal
TheDanimal's picture

This is a pittiful attempt by TPTB to delude themselves and others that this green energy shit is working and taking market share from fossil fuels.  Hey, why would the price of oil be so low if people still wanted it?

Tue, 12/15/2015 - 15:01 | 6926856 Professorlocknload
Professorlocknload's picture

It's all priced in Federal Reserve scrip.

Tue, 12/15/2015 - 16:28 | 6927213 Bruce Gender
Bruce Gender's picture

This is a CNBC partner site? Da fuq is going on here?

Do NOT follow this link or you will be banned from the site!