Saturday, July 13, 2013

The Affordability Factor

Old economy Steve thinks that things are going great.
Markets no longer have to choose between a stronger economy and easy money. Now they can have both.
The baby-boomer wet-dream has come true! Wow, the economy is like so strong and stuff, has it been workin' out? Markets are doing so amazing! It's a good thing they are tied to the reality on the ground right and not some speculative fantasy world where high prices and low wages equals economic recovery. Oh, right, that IS our world, isn't it?
But energy is another story, with crude oil prices already shrugging off the threat from China, a recession in Europe and even rising production levels in the United States. Oil approached $106 (U.S.) a barrel on Friday, close to a two-year high, making you wonder where the price will go when the global economic outlook improves.

If Canadian energy stocks finally respond to current oil prices, the gains are going to be sweet – especially if the Canadian dollar continues to weaken. Consider that when crude oil moved above $105 a barrel in 2008, Canadian energy stocks were more than 20 per cent higher than today’s levels.

The downside is limited, with the market already pricing in signs that China’s economy is heading toward a hard-landing and investors looking anxiously at rising U.S. oil production levels.
Wow, people actually take investment advice from this guy?!  "the downside is limited". Haha, wow! just wow! When are "investors" (read: speculators or traders) going to realize that they create these bubbles at a time when energy costs are incredibly high and affordability is incredibly low? Uhh, well gee, what happened last year after oil and gas prices spiked, oh yea oil fell down to $80! High oil prices kill economies that rely heavily on manufacturing (like China!) and guess what? High gas prices kill economies that rely on consumerism, you know, like the U.S.. When economic growth in those types of economies stalls resource producers (like Canada) are next as commodity prices collapse. We've observed this pattern repeat itself several times since the initial collapse in 2008 when oil reached $147/barrel.

What's really interesting about this authors assertions is he completely ignores the abnormal aspect of what's happening in the sense that it might represent a deeper problem. Earlier in the article he says:
Copper, one of the most important industrial metals, has fallen about 15 per cent this year and is down more than 30 per cent since 2011.

Canadian commodity-related share prices have also fallen on hard times. Energy stocks are no higher today than they were in September 2009. Stocks in the materials sector have fallen 50 per cent over the past two years.
Combine that with:
Oil approached $106 (U.S.) a barrel on Friday, close to a two-year high, making you wonder where the price will go when the global economic outlook improves.
Uhh, hello?!?! You don't see anything wrong with this picture then do ya David Berman? Oil will just rise, because, because.. "the U.S. economy is on the mend"? Hah, right. And affordability? Well let's see.

Inflation Is Too Low? Are You Kidding Us Bernanke?
Gassing up this summer is about to get more expensive, analysts warn
US wholesale prices up 0.8 percent in June driven by gasoline
Pain at the pumps as gas jumps 6 cents

Oh yea, this will continue for awhile right, this will not be like the last time last year when high prices collapsed growth (again).

There are few real investors left, most have now become traders. Real investors have an eye for the future, invest in the future not only looking for returns but rather returns on good idea which propel our species forward in general. Not speculating on commodities for "sweet gains".

A real investor looks at the world around him, and adapts. For instance, David Berman says:
As for the upside, it never hurts to look beyond near-term nervousness and instead focus on the bigger picture: China is a big economy that needs oil. A hard-landing won’t change that for long.

And there is always the possibility that a hard-landing won’t even occur, making today’s gloomy outlook for commodities a gift for anyone who prefers to buy stocks when others are avoiding them.
China finance minister signals may accept growth below 7 percent
World’s Largest Auto Market Plans to Restrict Car Purchases
China's appetite for Canadian resources in deep freeze

And the U.S. who Mr. Berman is saying is the reason China's slower growth won't be a problem for us? Well...

'Pothole Robin Hood' Steals Asphalt, Fixes Potholes
Climate change will disrupt energy supplies, DOE warns
As Congress debates food stamp cuts, moms fret about feeding kids

But don't worry the U.S. is going to continue funding things like Al-Qaeda in Syria and drones, so all of you "investors" in the market of death should do quite well. Hey speaking of Al-Qaeda in Syria, check this out:
Activists say Syrian rebels and fighters from an al-Qaeda-linked group have turned their guns on each other and are fighting for control of a key checkpoint in the northern city of Aleppo.

The Britain-based Syrian Observatory for Human Rights says Saturday's clashes are focused on the strategic checkpoint in Aleppo's Bustan al-Qasr district.

The checkpoint is the only gateway between rebel-held eastern districts and the city's western areas, controlled by President Bashar Assad's troops.

Earlier this week, al-Qaeda-linked militants seized the checkpoint and closed it for several days, cutting the flow of food supplies to the city and triggering the confrontation.

Residents angry over the blockade have staged protests against the anti-Assad forces as food prices soar in Aleppo at the start of the Muslim Holy month of Ramadan.
It's like the mainstream media has just given up trying to hide the fact the west is backing terrorists. Someone better tell old economy Steve.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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