Friday, October 1, 2010

Bernanke on Oil: "Mission Accomplished"

For some strange reason as fiat U.S. dollars flood the world searching out a home, energy has been a huge laggard.  I can understand natural gas as it is the least 'exportable' commodity in the world - hence is a direct reflection of the U.S. economy - it has been flatlining the entire 18 months of "recovery".  For all these daily obsessions with government created government reports the usage of electricity by a country's citizens and industries is the BEST gauge of economic activity.  What do you see below?  It has "recovery" written all over it, no?

(please note we came "out" of recession in summer 2009, and it's been good times since then - see how much natural gas prices have recovered??)

Unlike natural gas which is hard to pack up and send overseas to countries that actually have growth, oil should not be in the same situation.  It's a global commodity and easily transportable - hence it should be rising.  Finally the past few sessions it seems "mission accomplished" by Bernanke.

I for one am heartened by the upswing in oil prices as investment banking desks, and their top customers the hedgies take POMO funds and other easy monies and drive up prices.  As we have seen in copper, soft commodities of every sort, and finally now oil - when commodities increase that surely is a signal all is well and things are recovering in Cramerica.  Can't wait to tell neighbors and friends that we shall soon see $3 gas again ... hopefully we can return to $4 because if $3 means recovery, $4 means SUPER recovery.

Via yesterday's AP:

  • ...Oil inventories are nearly 18 percent above the average between 2004 and 2008, and distillates stockpiles are nearly 30 percent higher than the average, according to oil trader Stephen Schork. 
  • He thinks investment funds, such as hedge funds, are behind the rise in prices. "Effectively, there is no demand," he said.

Demand schemand!  Bernanke has no use for supply/demand economics 101.  He is creating his own economics.  Oil inventories 18% above average of 04-08?  Distillates (what actually go into the car!) up 30%?  No problem - send those prices up!  We have more money hot of the printing presses chasing oil barrels, we can get this oil to $100-$125 during QE2 and the celebration is on.  In about 6 months it should be feeling like late 07 in these here parts.

When your neighbor asks you why are prices going up in the grocery aisle and at the gas station despite the struggles in domestic economy, please refer him/her to the dollar chart in the previous post, and pat them on the back and whisper "this is what Bernanke says it is best for us and he is never wrong.  It is right for us to sacrifice so hedge funds and investment bankers can make mad money as one day they will trickle down their wealth on us."  You might need to tell them these things while you drive them to the local government assistance office to enroll in the food stamp program, but it is important to get the message across that their sacrifice is for the betterment of the upper 0.2%.  Remember, central bank created inflation (from thin air) is a great thing at all times, and we're all gonna get rich via this "magic" of the printing press.

[Feb 12, 2008: Wheat is Being Ruined by ... what else... Hedge Funds and Speculators]
[Jan 11, 2009: 60 Minutes - Speculators and Oil
[Oct 22, 2009: - The Oil Price Disconnect Hurts Us All]
[Jul 7, 2009: NYT - Swings in Oil Prices Hobble Forecasting]
[Sep 4, 2009: Meet Optiver, High Frequency Trading Friend in Oil]
[Jun 17, 2009: CNNMoney: Obama v the Oil Bubble]

No positions but trying to explain to parents why "things keep getting more expensive"

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