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Wednesday, 15 May 2019

#Shale Oil Peak Signals Serious #Economic Decline


"It will severely impact the world economy because with U.S. shale oil accounting for 66% of the rise in global oil production over the past decade, it was the leading driver for economic growth"



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Global Economic Growth In Serious Trouble When U.S. Shale Oil Peaks & Declines

The global economy would be in serious trouble if it weren’t for the rapid growth of U.S. shale oil production.  Since the 2008 financial crisis, U.S. shale oil production has increased by more than 6 million barrels per day.  Without these additional barrels of oil, the massive money printing and asset purchases by the central banks would not have been as successful in propping up the economy and markets.
We must remember this simple fact; energy drives the markets, not finance. Finance steers the market.  So, for the economy to expand, there must be oil production growth.  However, it would be unwise for the market-economy to rely upon the U.S. shale industry as the leading driver of global oil production growth for the foreseeable future.



Why?  Well, there are several reasons, but let’s first look at how much the increase in U.S. shale oil production has accounted for the rise in global oil supply since 2008. Of the 9.6 million barrels per day (mbd) of global oil production growth 2008-2017, the United States supplied two-thirds or 6.3 mbd of the total:

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THE FALSE PROMISE OF SHALE OIL




Sunday, 12 May 2019

Stage Set For A BIG Bear #Market


"Without a game-changing trade deal, all we’re left with is a slumping global economygrowing civil unrest across the worlda looming corporate debt crisis — all while are assets still hovering at all-time high valuation multiples."

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by Adam Taggart


At The End Of The Day, It’s All About Confidence


And sentiment in the markets is now souring. Bigly.

While many factors contribute to their creation, market reversals only happen when a shift in sentiment occurs.
That’s why bull markets can go on for much longer than reason merits. As long as the marginal buyer is keeping the faith that he can sell to someone else for more, prices will remain elevated no matter how ugly the underlying fundamentals:

Market Sentiment Life Cycle chart
But at some point, the once-bulletproof euphoria becomes exhausted. And at the critical margin, net buyers become net sellers. (For a reminder of the supreme importance the margin plays, revisit our report The Marginal Buyer Holds The Pin That Pops Every Asset Bubble)
Here at PeakProsperity.com, we’ve been waving a giant warning flag of late that the scorching rally since January is a massive head-fake; unwarranted and completely unsustainable.
In our recent piece, The Bull(y) Rally, we exposed how an extreme and unnatural amount of hand-waving, jawboning and razzle-dazzle from the central State has been expended to ‘justify’ the ludicrous levels today’s prices are at given the preponderance of data showing the world economy is sliding into recession.
We’ve been shining a bright light on the technical compression seen in the major stock indices, indicative that a major breakout move is coming — one we’ve argued is much more likely to happen to the downside.
Well, with the recent fizzling of the principal storyline supporting the bullish narrative — an imminent trade deal with China  — our predicted downside breakdown finally occurred this week:
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TEN YEAR BULL MARKET OVER?




Tuesday, 7 May 2019

#Economic Collapse Looms - Just Do The #Math

"The main lesson for me is that growth is not a “good quantum number,” as physicists will say: it’s not an invariant of our world. Cling to it at your own peril" 

By Tom Murphy


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Exponential Economist Meets Finite Physicist

Some while back, I found myself sitting next to an accomplished economics professor at a dinner event. Shortly after pleasantries, I said to him, “economic growth cannot continue indefinitely,” just to see where things would go. It was a lively and informative conversation. I was somewhat alarmed by the disconnect between economic theory and physical constraints—not for the first time, but here it was up-close and personal. Though my memory is not keen enough to recount our conversation verbatim, I thought I would at least try to capture the key points and convey the essence of the tennis match—with some entertainment value thrown in.
Cast of characters: Physicist, played by me; Economist, played by an established economics professor from a prestigious institution. Scene: banquet dinner, played in four acts (courses).
U.S. total energy 1650-present (logarithmic)
Note: because I have a better retention of my own thoughts than those of my conversational companion, this recreation is lopsided to represent my own points/words. So while it may look like a physicist-dominated conversation, this is more an artifact of my own recall capabilities. I also should say that the other people at our table were not paying attention to our conversation, so I don’t know what makes me think this will be interesting to readers if it wasn’t even interesting enough to others at the table! But here goes…

Act One: Bread and Butter

Physicist: Hi, I’m Tom. I’m a physicist.
Economist: Hi Tom, I’m [ahem..cough]. I’m an economist.
Physicist: Hey, that’s great. I’ve been thinking a bit about growth and want to run an idea by you. I claim that economic growth cannot continue indefinitely.
Economist: [chokes on bread crumb] Did I hear you right? Did you say that growth can not continue forever?


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MIT LIMITS TO GROWTH

Sunday, 5 May 2019

#Reasons Why The #CPI INDEX Misleads



The CPI no longer measures the true increase required to maintain a constant standard of living. This is the main reason that more people are falling behind financially,


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The Real Cost Of Living Increase Index


The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.

It exposes why middle-class Americans — salaried workers who are given routine pay hikes and retirees who depend on annual increases in their corporate pension and Social Security payments — can’t maintain their standard of living. Plainly and simply, the Index shows that their income can’t keep up with their expenses, and it explains why they increasingly have to turn to the government for entitlements to bail them out.

It’s because salary and benefit increases are pegged to the Consumer Price Index (CPI), which for more than a century has purported to reflect the fluctuation in prices for a typical “basket of goods” in American cities — but which actually hasn’t done that for more than 30 years.

The middle class has seen its purchasing power decline dramatically in the last three decades, forcing more and more people to seek entitlements when their savings are gone. And as long as pay raises and benefit increases are tied to a false CPI, this trend will continue.

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The myth that the CPI represents the increase in our cost of living is why the Chapwood Index was created. What differentiates it from the CPI is simple, but critically important. The Chapwood Index:

  • Reports the actual price increase of the 500 items on which most Americans spend their after-tax money. No gimmicks, no alterations, no seasonal adjustments; just real prices.
  • Shines a spotlight on the inaccuracy of the CPI, which is destroying the economic and emotional fiber of our country.
  • Shows how our dependence on the CPI is killing our middle class and why citizens increasingly are depending upon government entitlement programs to bail them out.
  • Claims to persuade Americans to become better-educated consumers and to take control of their spending habits and personal finances.


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REAL CPI OR RUNAWAY INFLATION?




Weak #Canadian Banks Targeted By Global #Short-Sellers


"Canada’s six big banks had a 13 percent jump in the value of short-interest positions from the start of the year to the end of March, according to financial-analytics firm S3 Partners LLC."


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Short Sellers Wait and Wait and Wait for Canadian Banks to Sink


Canadian households are wallowing in debt. Home prices are falling. Credit growth, the key driver for bank earnings, is hovering close to its slowest pace since 1983. All of which should be bad news for the country’s lenders -- and good news for investors betting against them.
“Should” being the operative word.
Even with danger signs piling up, the shares of the six biggest Canadian banks have stubbornly refused to drop, instead surging 9.4 percent this year -- and frustrating short sellers hoping to make money on stock-price declines.
“This is a process, not an event -- that’s how I think about it,” said Bradley Safalow, whose firm PAA Research LLC advises investors to short companies including Canadian Imperial Bank of Commerce and Royal Bank of Canada, and who has short positions in those banks himself. “There is some patience that’s absolutely required.”
The bet against Canadian stocks has become known as the “Great White Short” and investors pushing it remain confident that the decline will finally come -- it’s just a matter of time. There’s simply too strong an argument against the banks, they contend.
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HUGEST EVER DEBT BUBBLE MAY HIT BANKS

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