Submitted by Bruce Krasting – The Bruce Krasting Blog
How about the price of crude? It’s now down 40% in six months! The oil biz has been knocked on its ass as a result. The oil stocks have been taken behind the shed and beaten with a stick, losses of 20-40% in market cap are common. The fallout (good and bad) from the drop lead in all directions. It might even extend to politics.
The forces that have brought us the big drop have not gone away – the market is looking at an array of factors that could lead to still lower prices. The principal issue is supply – there’s too much oil around in the spot market, the future for global supply has been tipped by American/Canadian production. What’s next? Assume this scenario plays out:
In January of 2015 the new Congress passes a Keystone Pipeline bill. The law then goes to Obama for his yeah or nea. Obama says he will consider this important matter and will make a decision in a matter of days. There is uncertainty as to the outcome. The operating assumption is that O will go through with his oft made veto threat. 48 hours passes – and then this headline hits the DJ tape:
Obama signs Keystone Bill – Seeks “compromise” on other issues.
Okay traders – What’s your knee jerk reaction? Do you sell or buy WTI on the news? How about Brent? Hit the bid or take the offer? Better yet, how do you think the Algos will react?
Me? I think the headline is, (short-term), bearish for crude. The quick read on this is, “Jeepers! More supply!”
The Keystone Pipeline will not influence supply and demand for a few years. But after that, there will be more global supply of refined products and direct exports of Canadian crude that has not been ‘commingled’ with US crude. The knee-jerk market reaction of ‘lower on the news’ is probably a correct read of the future.
Agree with that? If so, where does that take us? Say the ‘Keystone news’ results in another 10% leg down in crude. Where does that take us?
The stocks of every company in the oil biz will fall further. The guys who run these companies hate it when their stock goes down. Most of them have incentive stock options that are already going up in smoke. Even worse, when the stock goes down their ability to do M&A deals is impaired. Issuing more stock when the stock is already in the shitter is always a bad plan. Continue reading
Vladimir Putin’s Presidential Address to the Federal Assembly, December 4, 2014
In his Presidential Address to the Federal Assembly, Russian President Vladimir Putin told the Federal Assembly that Washington’s plan for Russia is to break the country into pieces as was done to Yugoslavia. The American scenario for Russia is “disintegration and dismemberment.” Putin reminded Washington that speaking to Russia from a position of force is futile and will lead Washington to the same fate as Hitler.
Putin also noted that Washington’s disregard for its own and international law had made the United States into a lawless state that is a danger to the world. William Rockler, a Nuremberg Tribunal Prosecutor of Nazi war crimes has come to the same conclusion as Putin: “The United States has discarded pretensions to international legality and decency, and embarked on a course of raw imperialism run amok.”
Russia, Putin said, will deal decisively with anyone who brings force to Russia, as Russia always has. The difficulties that the Americans are bringing us “create new opportunities for us. We are ready to take up any challenge and win.” Continue reading
Arthur Rothstein Interior of migratory fruit worker’s tent,Yakima, Washington Jul 1936
We’re in dire need of fresh blood and smart new ideas to clean up the mess the present ideologies and their puppets and puppetmasters have created. The present crew has made a neverending series of ‘mistakes’, intentional or not, and they are dead set on making more, if only because they refuse to change the tack that led to all these ‘mistakes’.
I say mistakes because that’s what they are from the point of view of all those who live in the real economy, not because I think the puppetmasters are mistaken from their own point of view. After all, all they do, literally all they do, is take care of their own interests. Where they will find themselves mistaken is down the line, when there is no longer a functioning real economy, and they will of necessity end up going down with it.
However, even though you wouldn’t say it to look at America and Europe these days, we don’t need to be puppets to any masters. I know, I know, most of you don’t even recognize yourselves as puppets – yes, you -. You believe most of what you read, or at least enough to keep going on the beaten track. And they’re good at making you believe. They’ve gotten a lot better at it ever since you were born, whenever you were born. Continue reading