The new year started with a near 7% drop in the Shanghai stock market, so thanks for that, China.
The tumblers in the great lock of history are falling into place quickly. With the Dow set to open down about 300-points and the Eurostoxx 50 was already down 4%. (In fairness it bounced so as to only be down 3.5% a few minutes later…)
Just to keep this in perspective, 4% of last week’s closing Dow would be almost 700 points to the downside, so even if we drop, oh, 350-points today, there’s not often a one-day drop of this magnitude without follow-on selling into the next day.
How this all works out – and how important it is – depends on what you do for a living.
Since much of UrbanSurvival and our subscription www.peoplenomics.com is future-oriented (so you will be rational when the irrational happens), we see this as a precursor to violent conflict to the two factions of Islam.
It is a precursor because the Sunni Saudis have broken relations with Shiite Iran and it doesn’t stop there: Bahrain this morning (also Sunni) threw out relations with Iran.
If you are looking at things from the strategic Saudi angle, this makes a lot of sense. Because the price of oil is so low (and as the late Matthew Simmons pointed out in his landmark book Twilight in the Desert years back) the Saudis are getting killed to the tune of perhaps a billion dollars a day by low oil prices.
Water-cut is their problem – that how much water comes up with how much oil.
Since the Kingdom is run on a kind of royal welfare system that money shortage from cheap oil and water-cut is a major problem.
We see in the context of great books (like Report from Iron Mountain)_ whether useful fiction or a leaked and changed around playbook, that the Saudis have a serious issue in keeping their civilian population under control.
That – sadly – is one of the traditional uses of warfare: To keep civilian populations under the thumb of government.
In the current case, a “good war” with an “evil empire” will be quite saleable within deeply polarized nations of Islam. It will not only be a war (really caused by low oil prices) but a war during which control of their civilian population will be key. As we told you long ago, never forget the Saudis were buying at least one atomic bomb from Pakistan.
We are also looking at this as a stock trader this morning. Since 2015 was a “”whole freaking year” of no real advance in prices, we should be seeing in here a major decline I have been warning Peoplenomics readers about for weeks.
In fact, here’s a chart with my green target area for this week’s close circled, as well as a yellow (worst case) level.
As we’re currently expecting things to roll, the decline this week (and perhaps next, but less likely) will be brief and hard, hitting one or both of our targets. I suspect both, but I’ll update the chart tomorrow to see which target is hit, although if money (and hanging onto what you have) matters, you’d already be reading Peoplenomics so this stuff wouldn’t come as Monday morning shocker.
But from there, we should see a major turn of fortunes as the commercials load up at bargain prices over the next couple of weeks and then run things up a bit as they did in the late fall of 2008.
There remains a good chance, though that optimism will persist through the presidential follies, although if they don’t, then Depression II could be along in just a few minutes time.
Our best guess, however, is that the current escalation path toward war will be shortened because neither the U.S. nor Russians (who are backing the Shiites by backing Assad and selling nuke plants to Iran) will stand for it.
In many ways, the U.S.
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