I'm noting that parallels to historical patterns in the market decline, which I had mentioned some months back, appear to be continuing to develop and more consistently well now...
Everything, mostly, is still going down... and appears likely to sustain that trend for some time still, as the global economy continues on trend into a still deepening recession, which has fully engulfed the markets since midsummer...
In hindsight, very clear that oil and gas, for now both, peaked, back in June, with gas making a double top into August. Energy still necessarily functions as the pulse of the global economy, with the price action recently clearly showing it having something like a cardiac event... but, unlike in prior market events, or, far more than in prior events, there is a far more conscious awareness of that... energy given OPEC being the last commodity market not already fully under the price suppression and control imposed by the banksters... That independence now under attack, price manipulation and control being made policy... pairs with a far more interventionist interest than in prior events... with oil being made a clear focal point of the geopolitical conflicts that are unfolding. So, a lot of effort is being made now to layer in a forced regulation of that pulse, if with dramatically conflicting inputs... Dr. Biden, having induced the cardiac event on day one, is continuing those efforts and doing a horrific job of medicating the patient... and has prescribed a series of radically different things that each conflict with market function and stability, and conflict with each other and only amplify the problem rather than stabilize it.
In result, I'd suggest you can't fully rely on or use the signals coming out of the oil market in the way you might have been able to in the past... as the functions are being deliberately suppressed. But, that fact in itself is useful in relation to understanding the economic impacts imposed in the larger markets... as the conflicted effort is made both to poison the oil markets... and to force them to keep working harder to produce more for less... conflicts which clearly are not sustainable...
Oil And Gas Prices Slide At The Start Of The Year
and oil shares extremely volatile today...
Longer term... I think you look at the "max" button on oil prices... and note the obvious parallels to July 2022 in July of 2008 and 2014... but, also have to recognize that relative to those prior (and continued) patterns... you are accounting for oil prices now in an radically more inflationary environment, that we haven't seen the likes of since the 1970's. And, that is NOT going to change anytime soon... as it CANNOT change... purely as a function of monetary policy seeking to impose control or changes that are directly counter to larger and more REAL changes occurring in the economy. That monetary policy can work to throttle demand is still true, if only partially so, given necessary limits in will. Trying to untangle the near or long term impacts on energy prices when "control" (as suppression) of the oil price is made the focal point of the ongoing global war... ? I think you have to approach that with analysis of the conflict having some priority over the now defunct assumptions about there being any "free market" function in the pricing in energy... without that meaning "price controls" can ever succeed in the longer term... as we can see already in the impact of Biden's policy choices... meaning a declining supply that has been declining faster than the economy declines. Prices tanking now... seems to suggest it might have as much or more to do with probabilities in the global conflict than it has anything to do with change in the relative economic utility of oil. Is the market telling us the expected U.S. / European ramping up of sanctions on Russia in Jan / Feb... isn't going to work ? Or, is it instead telling us without the impact of that "pre-planned" impact on supply... we have more oil than we need, now, as the shrinkage of the global economy accelerates sharply into 2023 ?
The common factor that is independent of the direct impacts of war policy or its adjunct in monetary policy... is the reality of inflationary pressures... so, layer in an adjustment factor for inflation on oil price charts... and project some new trading range in result of prior and future currency devaluations ? It perhaps makes more sense, now, to track oil prices in relation to gold... than any other metric.
It leaves me thinking that there is a generational scale opportunity emerging in the oil markets... as the "green" alternatives the left prefers (mostly as they get their 10% for the big guy that oil producers won't give) are technically and economically unfeasible at scale, still... while the combined REAL impacts of suppression in oil (also meaning less energy exists to enable any green transitions)... requires including the ongoing destruction of Russian capacity that is occurring...
Looking at charts for gold and silver... they do appear to have performed as I'd predicted in this environment... not roaring higher (yet)... but, also, no longer participating in the declines that are being imposed on everything else... which is exactly coincident with the same pattern as was seen in 2001 / 2008.
So, a practical plan for the next... year or two (?) of market decline... would be to preserve value by holding more inflation protected choices... expecting that when the market does bottom... it will make sense to rotate $ into what is now becoming the most undervalued potentials...
Gold and silver for now... some other commodities too, with an keen eye on those almost certain to have shortages developing... not ignoring that the global conflicts are not resolving any time soon... but are likely to continue on trend, sporadically becoming more acute.
But, other things, like REE and other minor industrial metals that might be made victims of geopolitical events... relate only to "future demand" issues... fully fungible with the level of economic activity... while oil demand is necessarily sustained as a constant level of flow... that varies in far smaller percntage changes in flows...
I suspect gold and silver shares will participate, if fleetingly, in any newly accelerated market declines... while the metals themselves are more likely to opt out of such participation...
So, continue to buy, accumulate and hold PMs, "wait for it" short term and BTFD in the miners on bad days in the markets... "wait for it," and only that, in the larger markets [which are still priced for an economic and geopolitical environment that no longer exists]... while expecting more Wiley Coyote moments ahead... It will come [with any Fed "pivots," that some expect "soon," to send inflation, gold, silver and commodities soaring] And, as markets bottom... and slide into ~ a year long "pause" before they emerge... look at the best opportunities (buy low) in the most reviled sector... the junior oil and gas explorers... as they ignore the big picture and plod ahead and succeed in finding... while the big players all refuse to look, for now...
Being right on the changes in trend is important... but, being right on the timing is vastly harder...
I think we're in for a "slow" change... not any sudden major bull markets coming out of nowhere...
The prior trend lasted 42 years... from Nixon to Trump... enabling China's rise, but with Clinton and Obama upending any real "free market" competition in globalization in favor of selling out to a flagrant national socialist mercantilism... imposing a fragility in the global economy that has now been realized, but still exists and has to be unwound before there is any room for future improvements...
The wrong policy choices... which are all we are going to get from Biden, Putin and Xi... will tend to impose accelerations in the failure modes experienced. They don't value what you value... and their interests are not aligned with yours... in any element other than in those reached as "limits"... as Putin is discovering in the error in his expectations re Europe's willingness to be bullied... as Xi is discovering in the error in his expectations re China's willingness to patiently submit to his flagrant Covid policy errors... and as Biden is... blind to... or is intentionally enabling... in fostering the broad range of failures his policies require will occur.
So, in timing... the outcomes in the ongoing war... the outcomes in the economic realities that war imposes... leave you room to speculate on how and when failures will materialize and be valued in the markets...
The election calendar in the U.S., or other political change being enabled in the U.S. in the next Congress... a bit more easily parsed as providing some known bookends to the current trends...
Europe and Russia... have been derailed by the conflict between their choices and the practical and economic reality. Both likely will remain trapped in the real errors imposed by and entrained within in the dueling errors their paradigmatic myopias... both will blindly proceed in reinventing rhymes that match prior history... as more functional choices require new and more visionary leadership than is possible now. Neither Putin (nor his neoTzarist model) in Russia, nor the EU in Europe... appear likely to survive contact with reality.
China (but, also India, et al) gets cheaper oil as an temporary advantage in result... but, at the same time, China loses the ability to convert that lower cost of production into growing sales... and when change occurs that alters that current but temporary balance... ? Europe a "strategic competitor" to the U.S. ? Yeah... not so much. Authoritarianism is reaching for and exceeding its limits, again, as it did from 1917 into 1943... and, as then, has already far exceeded its real span of control... while refusing to acknowledge that limits it hand waves away... are real and uncontrollable externalities. WEF world... no longer a "conspiracy theory"... likely to encounter headwinds unlike any before... as a necessary element in avoiding the disasters their own brand of myopia seeks to impose.
Mercantilism has failed. Control of "managed trade" having been lost, trade enabled under its structures will only continue to fail with it. Cooperative globalism enabled among "strategic competitors" is dying... its failure having only begun, has not reached any limits... leaving it useful to understand what they are, the nature of them, and their dependencies, as change proceeds inevitably. War is made inevitable in one result of resistance to the inevitable trend in change, and that outcome seems it is not yet approaching any limit. Socialism has again exceeded its economically sustainable limits, as it had in the 1970's... only, now, with a vastly more ossified base in failing institutions that all appear unlikely to prove adaptable.
Along with the reversal in trends occasioned in the pairing of the brittle failure ending mercantilism and its functional value in fostering a now failed attempt at imposing a new (globalist, national socialist) world order... history has also now been set in reverse... The reversal in the economic trend, with the accumulation in costs of events in 2001, 2008, 2014, and 2020 up to 2022... have also reversed that trend while essentially resetting us back to 1974 financially... only, now, with a massive legacy in prior failed attempts to paper over the (black hole in derivatives and QE "black hole filler") systemic problems the last 40 years have exposed... but with that legacy, the history outside of finance has moved us a bit farther... maybe to 1947 in reverse... or to 1913 or 1935 if history continues moving forward...
Russia, once co-conspirator with and then victim (with others) of Germany in the prior century... China, once victim first of (its own insularity and) western and then of Japanese colonialism and imperialism... ? The utility of history as guide fails us there... after 40 years of western efforts seeking to rescue China from the failures of its communism rule... and after twenty years of effort trying to extract Russia from its own communist imposed economic quagmire... Both projects have now patently failed... not of themselves, intrinsically, as the economic transformations enabled under the integration of Russia and China into the global economy have been dramatic...
And, of course, Russian and Chinese apologists will not like that view of reality...
But, reality doesn't care...
It is a parallel reality that the western leadership is not blameless in fostering the failure... as the attempts made at integration, paired with the profit it enabled for "some"... came at a huge cost to western societies... that included tolerating a fabulous degree of corruption, the weakening of markets, and the ongoing subversion not only of free market functions... but also other western social norms... like free and fair elections... of governments that do not appoint themselves as our rulers...
Those in China and Russia that see resulting political conflict emerging in the west, now as global economic stresses mount... will tend to see it as evidence of the west "failing"... but, that failure that occurs... will be the same as their own... ultimately resulting in the restoration of "what works"... and the end of the century long experimentation with socialism... whether as communism, as national socialism... or some hybrid of them.
As mercantilism enabled under the WEF's vision of global kumbaya under globalist national socialism fails... it isn't the origins of the failure or the fact of the failure that matters... but the nature of the residuals as the failure inevitably proceeds... and the resulting impact of the inevitable in failure modes as failure occurring leads to conflict...
That leaders around the world... all sides, for now... seek to continue that prior trend in post WW II history... as they fail to understand both the reason for and fact of its failure ?
The ongoing brittle failure of mercantilism (and both brands of socialism, everywhere, as its advocates and political dependents) is irreversible...
Inflation is here to stay... as attempts at killing it now, as was done back in 1980... will today require putting the global and U.S. economy into a greater deflationary depression than we've ever experienced before, with real economic contraction on a massive scale (which they'd gladly enough do to us, while using printed money to buy up everything they don't already own) but, that, while also thus ending the power and control of the banking system rather than enabling it (which they will not gladly allow)...
So, "more of the same only more so" in "Great Reset" plans not withstanding... the operative mode in all those schemes failure modes is... reality requires that "you can't get there from here"... And, "them" not liking that answer... doesn't alter its validity.
The reversion to a gold standard... in some form... appears that it is the only viable path forward... although that also requires the failure of the accumulated derivatives frauds of the global banking system... more as the CBDC / crypto trial balloons have all now apparently popped... the quality of the new brand of "digital" fraud they enable in practice being proven as insufficient to replace that of the existing banking system... /s |
