When it comes to propaganda and "boosting confidence" few things are as powerful as the "narrative' or rather, how it changes on what now appears a daily basis. And in a market dominated by algos which have a 15 millisecond memory, nobody cares if the narrative from 3 days ago, or 3 months, or 3 years is diametrically opposite from that today.
Case in point: we previously revealed [6]Goldman's "analysis" of the commodities market from July 28, 2014, which is summarized as follows:
- The long-awaited global recovery appears to be getting on track, lifting commodity demand
Since then, commodities have cratered across the board, not just crude, but most other prices as well including iron ore, copper, nat gas, steel and so on, in what is clearly a reflection of the rapid global slow down, one which has so far managed to see the US "decouple" from the rest of the world.
To be sure, Goldman's late summer spin is nothing new. Here is the USA Today [7]from December 31, 2013 "explaining" rising oil prices with an "improving US economy and greater demand for gasoline."
[8]
But nothing crushes the "it's good for the US consumer" narrative quite as well as the counternarrative that had emerged in the mid-2000s when, unlike today, crude just couldn't stop rising with every passing day.
Because if plunging oil prices are so great for the consumer, surging oil should have been very, very bad, right? Wrong.
Here is precisely how the narrative was framed on March 5, 2006 by Citi's Ajay Kapur:
Oil and the Consumer.
We have heard constantly that oil will slow consumption down as it eats into disposable income. But it remains a conundrum to many that consumption has remained robust, despite oil prices remaining high. What’s going on? We don’t see a conundrum. As we wrote about in September (The Global Investigator, Is Oil Relevant for Equities, September 2 2005), in the plutonomy countries, the rich are such a massive part of the economy, that their relative insensitivity to rising oil prices makes US$60 oil something of an irrelevance. For the poorest in society, high gas and petrol prices are a problem. But while they are many in number, they are few in spending power, and their economic influence is just not important enough to offset the economic confidence, well-being and spending of the rich.
So there you have it: rising oil was indeed bad. But it was only bad for the "poorest in society", those whose economic influence is "just not important enough" to offset what the plutocrats are doing.
And, logically, if soaring oil prices were irrelevant for US consumption a decade ago because to the wealthiest 0.01% oil at $50 or $150 simply does not matter, so the inverse must also be true. Of course, one will never hear that, because when it comes to propaganda and "confidence building", all is fair. Especially when dealing with algos who can't remember what happened more than 15 milliseconds ago, let alone 15 days or 15 months...
