Things That Make You Go Hmmm…
John Mauldin
September 5, 2011
Este artículo no está disponible en español. Para su comodidad, aquí está la versión en idioma Inglés.
I
love Grant Williams and his writing in his letter Things That Make You Go Hmmm... And this week's Outside the Box is
the first section from his recent post, where he starts with a brief history of
Gadhafi and ends up giving us a tutorial on oil pricing. This may be "inside
baseball" (too much detail) for some of you; but these details are important,
as the very ground of oil pricing is shifting away from the traditional
sources. What will the mainstream media do? Wonder when they will shift, which
will result in a LOT higher costs for most of the world. Besides, this is a fun
read, and Grant is a great writer.
And
quickly, this note From Dennis Gartman: "Finally... and we shall cover this at
some greater length tomorrow... S&P has said over the weekend through one of
its senior spokespeople in Europe that if a EUR-bond is underwritten it shall
have the rating of the lowest rated constituent country involved and thus will
have coupon far, far above that of Germany, or France or Belgium et al. A
EUR-bond would thus have the credit rating of Greece!"
I may have to write about Europe
again this week, as there is just so much going on. The key to watch is the
German Constitutional Court decision, due Wednesday. If they rule against the
euro, all h#$% will break loose. And they could, although I expect a more moderate
outcome, as they realize the entire future of the euro project is riding on
their ruling. Do they want to get blamed for imploding the euro?
This week's OTB comes at the end of
Labor Day, when all my kids and various friends (some 30-odd) have shown up for
food and grilling. I think I am a fair to middling writer and analyst, but I am
a brilliant cook (none of this humble analyst stuff in the kitchen!), as all
who get to sample my culinary offerings agree. Definitely not low-calorie
offerings. Cooking is an all-morning and day affair. Partner Steve Blumenthal
of CMG came down Monday morning for some needed businesses meetings, and it may
be the first time we met in the kitchen while his partner was cooking. I had to
attend to the serious stuff! Butternut squash/carrot soup must cook for 6-8
hours. Mushrooms, veggies, meat, grilling seasoning. They all take time and
great attention to detail.
And
Steve and Billy Peters (of Baton Rouge) took me to the LSU-Oregon game this
Saturday evening in Cowboys Stadium with 87,000 fans, most of whom were from
LSU. I have never seen such a rabid (the correct word) crowd. It may be
something like English football crowds. I attend professional events all the
time, but nothing prepared me for the volume of noise.
Have a great week. The house is starting to smell
awesome, and my kitchen calls.
Your my ears are stilling ringing analyst,
John Mauldin, Editor
Outside the Box
JohnMauldin@2000wave.com
Things That Make You Go Hmmm...
"Formula for success: rise early,
work hard, strike oil"
– J. PAUL
GETTY
"China gets their oil from Libya.
Why isn't China involved? They're going out spending billions of dollars a day
on trying to take over the world economically. And we're spending billions and
billions and billions of dollars on policing the world. Why isn't China
involved with Libya?...we don't get oil from Libya, China does."
– Donald
Trump
Pythagorean theorem: 24 words
Lord's...
Comments
Brent Tharp
Sep. 13, 2011, 2:08 p.m.
I hear this same argument about oil prices indicating future inflation on CNBC all the time (mostly Bob Pisani), and it drives me batty. Oil is quoted in USD, so there is a direct relationship of oil to the number of dollars, or more specifically, the exchange rate. If the USD falls, then by definition oil goes up. This is unlike true inflation where there is too much money chasing too few goods. There is really only inflation to the extent that the increase exceeds what would be indicated by the change in the exchange rate, and even then it can also indicate some speculating in the futures market. As to other inflation, businesses are once again becoming awash in inventories since they (like many others) misjudged the “end of the recession” for what it was, the government spending massive amounts of money created out of thin air, and what it wasn’t, organic demand. This will lead to further pricing deterioration in the face of falling demand.
We are in a consumer and housing driven recession, not a business cycle recession, and virtually every Keynesian economist out there is completely missing the fact that the closest analogous period is the Great Depression. We are in a deflationary spiral, the end game of which has only been averted by massive money printing. But the velocity of money has still not budged, and the Fed is running out of bullets. More importantly, it is running out of time. If there’s no real movement in end demand, in housing, in retail sales, and most importantly in employment and the velocity of money, then the amount of money that would be needed to avert true deflation would be more than the Treasury could possibly print without risking a massive redemption of US Treasury securities and the US credit rating coming down much further. There will eventually be inflation, and it will be massive, probably on a scale never seen before in the US, but that day is several years from now. We are only a few years into our adventure/experiment of being just like Japan but saying we aren’t!
It was a nice try, but soon the lifetime academic Ben Bernanke and the lifetime politician Barack Obama, and the lifetime spinner/fixer Tim Geithner, will learn about facts over words, and real life over theory, and that sometimes the world is actually bigger than yourself, and you can’t control it no matter what games you play. And I look forward to that day, not because I have ever wanted this for our country, from these men among many others (including every major investment bank and rating agency), who have driven it into the ground. But unfortunately, the end is already decided by actions that now cannot be reversed and a course that can no longer be changed. No, I want that day so that I can see them, even though I know I won’t hear it from the cowards, realize that they were completely, 100% WRONG.
Jeff Ohlinger
Sep. 8, 2011, 12:38 a.m.
Until all the monetizing, QE and/or currency debasement results in revenue growth for businesses and wage growth for consumers, how can oil prices continue to rise without causing a recession (or worse)?
I just don’t see it. And there appears to be virtually no chance for any kind of significant wage growth in the Europe and US, at least not any time in the near future.
Denis Ouellet
Sep. 7, 2011, 2:05 p.m.
Nice to see I have company on the Saudi ploy to keep prices high. I wrote about that in May (SLICKLY SAUDIS, STICKY PRICES at http://www.news-to-use.com/2011/05/slickly-saudis-sticky-prices.html).
The June OPEC meeting was exactly what the Saudis wanted: no agreement, no real increase in supply and no harm on Saudi Arabia’s reputation as friend on the West. The reality is that the Saudis masterly orchestrated the script and the show to achieve their ultimate goal: higher oil prices without a public relation backlash. (http://www.news-to-use.com/2011/06/oil-saudi-arabias-pr-coup.html)
In July: SAUDI’S HIGHER OIL OUTPUT MAINLY SELF-SERVING ( http://www.news-to-use.com/2011/07/saudis-higher-oil-output-mainly-self-serving.html) Saudi Arabia had compelling domestic reasons for pumping more crude in June. Many of the additional barrels have been supplied to its own refineries, where throughput is estimated to have risen by 250,000 b/d in June to reach 1.71m b/d, largely because of the return to full service of the Rabigh facility after a period of routine maintenance.
Actually, the kingdom needed more oil for “power generation and water desalination plants during the peak summer season”. The IEA estimates that about half of the extra output – a comparatively small 350,000 b/d – will have entered the international market.
Higher oil prices are a big factor in the current economy problem in the US and Europe. Discretionary income is being squeezed as a result right when the Western world is desperately seeking ways and means out of its serious economic problems.
Duncan Hume
Sep. 7, 2011, 9:29 a.m.
Whenever I see that list of the age of the major oil fields I wonder how it is that we do not see any evidence of their depletion in the price of oil. I have concluded that so far there has been no normal supply/ demand relationship because supply is so much in excess of demand and price is being set politically. When price does move to a supply/ demand model those that can will attempt to take control of supply by force. Is this starting to happen now? It has been a while since there has been a real war but tensions and instability are building, oil could be the fuel.
Tom Beresford
Sep. 6, 2011, 3:40 p.m.
That little ‘Europe’s Problems’ snippet sure is cute, but I’m sorry to say it’s not true.
http://www.snopes.com/language/document/cabbage.asp
(of course, I trust you fact-check your serious articles!)