Crude Oil

The mainspring of Islamic extremism and militancy isn’t the moderate and democratic political Islam, because why would people turn to violence when they can exercise their right to choose their rulers? The mainspring of Islamic militancy is the despotic and militant political Islam of the Gulf variety. The Western powers are fully aware of this fact, then why do they choose to support the same forces that have nurtured jihadism and terroris?

In March 2014 Wall Street’s ex-items S&P 500 earnings forecast for 2015 was about $133 per share; it ended up 20% lower at $106. Yet here they go again - the consensus for 2016 started out at $137 per share last spring, and is just now beginning to make its way back toward the high $120s. It is a barometer of the abject complacency and intellectual sloth that has descended on the casino owing to two decades of Fed coddling and seven year of free money for the carry trades. In the case of Chipotle, it was always just a burrito. In the case of the US and world economy and financial markets, it’s not even that.

While one can never be entirely certain about these things, as they always play out slightly differently, it could well be that the upturn in the Rand gold price and SA gold shares is once again a leading signal for the entire sector. The canary in the gold mine so to speak, only this canary isn’t dying: instead it is a dead canary that is coming back to life.

It's getting worse... faster! These two stunning overnight developments in crude oil prices should shock investors...

The half-life of the latest "market supporting" intervention by the Chinese government: just about 12 hours.

The problem of reaching limits in a finite world manifests itself in an unexpected way: slowing wage growth for non-elite workers. Lower wages mean that these workers become less able to afford the output of the system. These problems first lead to commodity oversupply and very low commodity prices. Eventually these problems lead to falling asset prices and widespread debt defaults. These problems are the opposite of what many expect, namely oil shortages and high prices. This strange situation exists because the economy is a networked system. Feedback loops in a networked system don’t necessarily work in the way people expect.

Daniel Yergin and other experts say that U.S. tight oil is the swing oil producer of the world. They are wrong. It is preposterous to say that the world’s largest oil importer is also its swing producer. There are two types of oil producers in the world: those who have the will and the means to affect market prices, and those who react to them. In other words, the swing producer and everyone else.

While the "sell in 1973, and go away" plan had worked out for some in the commodity space, the destruction of the last decade has only one historical comparison... the middle of The Great Depression.

• Weakness in the Canadian Economy driving its currency lower
• Inverse relationship between commodity prices and USDCAD exchange rate
• Why there could be a reversal in trend

How did the Canadian currency reach a twelve year low?

The US Dollar reached a recent high against CAD at 1.41081 on January 6^th a level not seen since August 2003. The general bull trend the green back has been in picked up momentum since talk begun by the Fed of a return to higher interest rates.

With WTI trading with a $32 handle, collapsing below December 2008's $32.40 lows briefly overnight, OPEC's broad basket price for crude has also reached a worrisome milestone. Amid Saudi price cuts to Europe, the basket price was set at $29.71 today - the first print below $30 since April 2004.

Once China set the Yuan fixing some 0.5% lower, the biggest drop since the August devaluation, all hell broke loose and unleashed a global selling panic after China's stock market was promptly shut down less than 30 minutes into trading, then European shares dropped the most in more than 4 months as Asian equities plunges, as did US stock futures, the dollar weakened against the euro and the yen; crude plunged to fresh 12 year lows. Gold rose.

For more than four decades Washington’s middle eastern policy has been dead wrong and increasingly counter-productive and destructive. Washington’s Mideast policy is predicated on the assumption that the answer to high oil prices and energy security is deployment of the Fifth Fleet to the Persian Gulf. And that an associated alliance with one of the most corrupt, despotic, avaricious and benighted tyrannies in the modern world is the lynch pin to regional stability and US national security. Nothing could be further from the truth. The House of Saud is a scourge on mankind that would have been eliminated decades ago, save for Imperial Washington’s deplorable coddling and massive transfer of arms and political support.

Energy investors got clobbered in 2015, and are hoping for things to turn positive as we head into the New Year. What can we expect in 2016? Here is a rundown of some key trends to watch for...

Before we go into details of the overnight carnage, this is where we stand currently: S&P futures now down 33 points or 1.63% while 2Y Treasury rallies pushing its yield back below 1% as EU stocks extend their drop after China weakened its currency, North Korea says it tested a hydrogen bomb; Brent crude falls to lowest level since 2004.

Taking away from the government its power of compelling the citizenry to accept money that it monopolistically controls and abuses may serve as an important legal and economic change to force the government and those who live at its spending trough to face the reality of the welfare state’s ideological and fiscal bankruptcy before it is too late to avert a complete collapse of the society.