The “Bittersweet Rally” Continues But Markets Are …

(updated as caffeine soaks in) Till opening time…..It is Columbus Day and that means the U.S. banks  are closed in honor of something – maybe the beginning of the North American genocide which is which is how unabashed history informs us.

Why we would celebrate the arrival of European disease laden Spanish imperialists is beyond my comprehension, but I don’t make up trading schedules.

Fortunately, we can still see bits of reality in the global futures market…

A glance at them  reveals in a flash why the price of gold is up another $11 bucks and why the price of silver is getting comfortable above $16 here lately.

The good news – and bad – of it is the US dollar is cratering.

The Dollar and stock prices have a contentious relationship. 

When the Dollar is strong, it doesn’t take as many of these higher-powered pieces of paper to buy so  much of a fraction of the American consumer market.  As a result, since things are measured in dollars, it seems like the market is going down when this happens.

The flip side this morning (see the Euro to Dollar chart at the top of this page) is that when the dollar goes down in purchasing power, the number of Dollars to buy the same slice of Americana goes UP.  And that means (since it takes more scrip) it seems like the market is going up.

It’s not unlike inflation:  When there is more papers chasing the same amount of goods and services, prices seem to go up.  Or, more accurately, they actually go up since you can’t walk out of an auto dealership paying last year’s prices.

So that’s where we are this week.  The dollar is declining relative to everything else on the planet, seems like.  Does that mean the US is “leading an economic recovery?”  Absolutely not. But it does make the prices of foreign markets cost more scrip here which is why Japan seemed to go up 1.64% overnight while the Chinese SSE was up 3.28%.

European markets were stable though, after the run-up in Asia, so we shall sit back and see how the rest of the week develops.

The Week Ahead

The main thing to be looking at in market action should come Thursday when the U.S. Consumer prices for the month just ended will be released.

I’m thinking that a surprise bout of inflation would be a fine thing to anticipate. 

One reason will be found in the Triple A gasoline price survey (here).  Prices are putting in what can be envisioned as a long slow “cup” formation and at some point, the Labor Department numbers will begin to reflect the oil price lows being in – at least for a while.

This gets interesting:  Kuwait is talking about higher prices of oil to come and in part, we suspise that is because the giant fields of the Middle East – the Kings, Queens, and Jacks – are actually running into the water-cut problems that were so clearly spelled out in the late Matt Simmons book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.

The book was a landmark in laying out the hard data.  And although Simmons’ death was ruled accidental, I’ve always had a gut feeling to the contrary. 

Call it the “old reporter instinct” but when people die who are in process of making major revelations, I get….well….suspicious.

The core point of Simmons work (and it’s echoed every time I talk to Oilman2) is that yes, Peak Oil is real, but it has been masked by short-term energy breakthroughs.  But when I talk to people around here in the oil and gas business, it’s all the same thing:  When the fracking has reached its limits, the path down to a much lower-energy lifestyle will be along to smack us all.

And things won’t be pretty.

The War for Syria

This longer-term reality of oil (spare me the abiotic crap – I won’t even discuss oil with anyone who hasn’t read Simmons and the long term – since 1970 – U.S. production data.) is what drives events in the Middle East for China and Russia.

imageOff the coast of Syria lays a possible extension of the Leviathan field which is what makes Lebanon so key to the economic future.

Called the Levant Basin, you can see on the map to the right that Syria has some front row real estate and this is why the territory is being so hotly contested by all the major world powers.

However controls this – and the undeveloped areas of Iran and Iraq will hold the keys to the future.  Having energy is necessary to make the conversion to a sustainable energy future.

With one small problem, or course:  We don’t have an economic system which is sustainable – it requires growth or death – which is a secondary problem and has been all along.  That’s where out planned obsolescence came from that we’ll dig into in the Coping Section in a moment.

For now, the two major concerns are that China is “all set” to join the Russians in fighting ISIS and the [stupidly] American-backed anti-Assad forces in country.

You would have thought the U.S. might have learned a thing or three from the disastrous “regime-change mentality” that can mostly be laid at the feet of Paul Wolfowitz and a nest of nasty neocons who didn’t understand how only strong hands rule in the Middle East.

As Chinese naval forces are reported nearly enroute to the sea lanes off Syria, we figure it will only be a matter of time until global markets figure out that we’ve blown it again and the absolute price paid in script for a segment of America will be discounted – a process which should clobber the markets.

The reason global markets are not already in the crapper today is likely reports that Vlad Putin is not contemplating putting ground forces into Syria, although misdirection is a favorite move in international chess play.

Stupid American Politics

Looks like the Clinton Big Checkbook is still there.  We notice that president Obama has weighted in with his pronouncement that while Clinton’s email server (mess, disaster, or whatever you want to call it) was dumb, it didn’t represent a security threat.

This is a fine example how if a Big Lie is repeated often enough…

RealClearPolitics collection of polls show that the bounced SecState (who still has an appearnace on the Hill in a couple of weeks to traverse) is still out front of Bernie Sanders (a more forthright socialist) and Joe (“will someone make up his mind for him?”) Biden.

Trump and Carson are still leading the republican side.

GOP is a POS

I should mention that the repugnican party is still in process of blowing up.  After the disaster with the speaker and the resulting power vacuum, there’s still no sign of a new Speaker.

US Snooze figures Paul Ryan could win the job, but that would just add to the evolving odor around the Washington Cabal’s Obama-Wing of the Republican Party which spawned such poor leadership as we’ve suffered through lately.

When a democrat starts endorsing a repugnican, you know the fix is in and the “opposition party” has already been to the veterinarian’s to be neutered.  The New Old is the Same Old among this self-serving gathering of anti-Constitutional sell-outs.

Ryan is another disaster in the wings: He’s been a backer of Secret Trade Sellouts and Open Borders, which may be good for his personal finances, but it’s the same hackneyed K-Street String Pulling that continues to move America from the Great column  into the also-rans.

Suggested Reading:  The Great Paul Ryan Sellout.

The land of the free and home of the brave has, as should be obvious, been compromised.


The “Bittersweet Rally” Continues But Markets Are … — 13 Comments

  1. Thanks for the heads up!
    gold seems to be recoiling from its bitty peak of $1168/oz
    I expect this to drag down the S&P shortly, kicking off the week of banks numbers announcements.
    I followed your lead put and snagged 10 SPY 183 for $0.07 ea, and loved the fact that S&P mooned me. So I picked up 10 SPY 193s for $0.07 ea.
    S&P 1750 puts my puts at a gain of… well my expectations are high for breaking even this month.

  2. If Vlad isn’t planning to put more ground forces than the Speznatz guys that he already has running operations in Syria, then why did he decree a 150,000 man draft? More frolics in Eastern Europe, or a serious stomp down in Syria and Iraq? It’s an expensive thing to do when the Russian economy is not exactly prospering.

  3. Rise and fall of the Roman Empire vs the Rise and Fall of the American Empire Nuf said.

  4. ‘Morning George.. great report.

    What do you think about China no longer buying U.S. Treasuries? (Even dumping the ones they own)

    The dollar headed down and the TPP about to flood the U.S. job market with millions of cheap H-1B workers. They can’t sell Treasuries.. any guess what they will do?

    • only TWO courageous Senators are trying to STOP THE H-1B treason, Sen Sessions and SHelby—-both from Alabama.
      They also stood strong on the TPP opposition.
      Too bad neither is running for head PTB/Corporate dupe—–I mean president!

  5. When I look at this article and think about inflation and deflation and the value of the dollar while considering QE whatever..will the quantitative easing really actually effect the dollar in the future.Or is it to an illusion to gain more power.
    One thing I discovered a few years ago.. we all have what we think is important.. yet if something catastrophic happens our values change and our perception of what is truly important changes in a heartbeat of time..

    (The Creation of Money And Illusion of Wealth
    by Joshua on June 8, 2009 ·

    Our money was once valued by the worth of goods, but today it is our goods that are valued by their worth in money. Banks create money out of thin air by loaning it into existence. Increasing the money in the market creates inflation. This also means the system is required to continually grow in order to offset this inflation.

    Money is not a real object, its value is abstract, and controlling large sums of it is imaginary wealth. We have given the power over our currency to private companies – they are greedy black holes, constantly starved for more. The good news for them is they can create more money. The bad news for us is that they can create more money.

    Money is a tool, to be used in exchange for goods and services. The value of our currency is a conceptualized ideal that we all agree upon. For example, let’s say you can buy a watermelon for a dollar. The seller bases the value of his watermelon at a dollar on the assumption that another person will value dollars in a similar way. He can then buy some grain for the equivalent value with the dollar instead of trading his watermelon directly for grain.

    “Money only has value if everyone can use it.”
    Thus, currency acts as a medium to exchange goods and services instead of direct barter. It’s value is agreed upon by a consensus in the community. As Herman Daly and Joshua Farley describe it, “the value of a dollar, then, is the virtual wealth of the community divided by however many dollars are in circulation.” (Ecological Economics) Think about that as we talk about inflation… )

    • I think that is why the Bernster got away with the phantom wealth ponzi scheme so well.. and for so long.. people would get a sheet of paper once a month sometimes the number would be a little higher then lower a little bit then up a little bit all the while all it was was a little piece of paper and everyone was proud that they had the bernster sending it to them.. until the illusion was broken….They then found out that the paper was in reality only valued by the person holding it.. the illusion of wealth.. or the illusion of poverty.. we grew up in a modest household.. all the while never once considering ourselves poor.. the reason was we had the illusion of being who we were passed on by our parents .. That illusion passes in so many forms and ways.. As a child I was very good at thinking about abstract puzzles and read a lot.. sometimes up to two books a day.. and joined a small group that also had an abstract way of thought patterns and could pass tests that very few understood.. the problem was that the vast majority of the members all seen this abstract thought patterns as a form of wealth.. when in actuality it has very little to do with it.. the illusion follows in so many ways. My question is this we all assume that the illusion will be broken and the markets will crash and the dollar will take a nose dive.. unless someone shows up that can allude the majority to keep the illusion of the power of money stays the same.I am betting that there is a whole bunch of people at the top of the so call pile that want this illusion to continue on unchecked. I think that is why the markets haven’t crashed yet.. the wealthiest want to keep that illusion other wise their computers filled with an ever growing number would mean nothing.unless they owned and had goods on hand.
      An example of this comes to mind in Germany in what twenty seven or twenty eight..

  6. To make a point: All these representatives in office were elected by the “FREE and the BRAVE.” Reflect on that! ;-((

    • What was it I overheard a long term representative of congress tell another campaigner back in the eighties when he was asked what should I talk about… ” Oh just give them a one two three speech they are all dumb as sheep” we are nothing but chattel crunching our cud believing everything that DC wants us to hear..thinking that they have out concerns at the forefront of their minds and actions..