Stocks and Oil Rebound on the Fourth Day
This synchrony between oil prices and stock market indexes is to be expected in times of (propaganda-driven) economic uncertainty, such as in recent times.
Meanwhile, the US economy added 312,000 jobs in December 2018, a 10-month best. In other words, the US economy has been doing well, but the political opposition — which largely controls the US media — will do everything including dancing on its head while reciting Das Kapital, to conceal good economic or political news from the public.
The Market is Not the Economy
It is crucial to remember that “the map is not the territory,” the stock market is not the economy, and the model is not the reality (eg as in climate). Market volatility such as has been seen recently is caused in part by large institutional investors who are typically skittish in nature, and rely on computer models and lightning-fast computer trading schemes.
It is interesting to watch as international markets swing to and fro — often in tandem with several other markets, and in opposition to yet others. Market reporters tend to attribute buying and selling to transitory and ephemeral phenomena such as government reports, central bank announcements, etc. I have seen them use the identical event to justify both a rise in prices and a subsequent fall in prices.
Investors are a herd species, often stampeding in large masses. Humans are irrational beasts, after all, and can in certain situations be easily goaded to act without thought.
Try to make yourselves more singular in thought and action. Watch for opportunities, for patterns in the flow. Be very Dangerous and seek out others of like kind, particularly in situations where power laws apply — where joint action has exponential effect.
Interesting note: The MarketWatch.com website describes today’s upswing in market activity as “panic buying!” I have often heard the term “panic selling,” which makes a certain amount of sense. The phrase “panic buying” sounds like something that someone would say when their predictions had gone to hell. Market and economic commentators and journalists tend to be idiots, like most journalists and commentators in the mainstream.
Oil is an energy source and an asset class. It also sits at the heart of one of the most active doomer religions of the past 50 years. And it finances more dictatorships around the world than any other single commodity. It is worth learning a little bit about the 1st world phenomenon that upset all those third world and emerging world applecarts:
US Tight Oil & Gas Changed the Oil Price Equations
With the Addition of US Tight Oil:
At prices near $60 bbl, oil is plentiful worldwide. When the price of oil drops below $40 bbl (as in the 2008 global economic meltdown), many oil fields become unprofitable, and decrease their production — so that oil prices naturally rise in negative feedback fashion. When oil prices rise above $70 or $80 bbl, OPEC discipline breaks down and the relative oversupply becomes unstable. Oil prices drop until supplies better match demand.
It is important to also remember that the Chinese economy began to slow around 2009, when US tight oil & gas began to have a noticeable impact. Higher tight oil production by the US was ramped up over the years, and that effect plus the effect of lower demand due to the Chinese slowdown led to a radical price drop right about the time that Russia invaded Crimea and east Ukraine in 2014. Since then, prices have been naturally volatile, but have stayed largely within the $45 to $65 bbl range for WTI.
We are now in a period of ebb and flow, between global demand and supply. There is a relative oversupply in terms of potential production which is being intentionally held back by international interests — this is true from North America to South America to sub Saharan Africa to MENA to Central Asia to Southeast Asia to Russia. (It is important to keep in mind that Russian oil production is now mildly impaired by economic sanctions.)