Oil to take a beating. Affect on gold prices?
derryb
Posts: 36,194 ✭✭✭✭✭
The Saudis have defied OPEC with lower oil prices and Goldman has cut its Brent price target to $30 with "possible dips near $20."
Since falling oil price are viewed as anti-inflationary and gold typically declines on these deflationary views, oil and gold historically have a direct price relationship by moving in the same direction.
Will the coronal black swan infect the deflationary affect oil has on gold? I believe it will as long as the virus numbers continue to grow and the Fed continues to hit the panic button. The virus, nor the Fed, show no sign of slowing. It is becoming more difficult to determine which has a greater affect on rising gold prices. I expect an early release of more QE that will only fuel the PM fire.
Your thoughts?
Keep an open mind, or get financially repressed -Zoltan Pozsar
Comments
Here we go . . .
Keep an open mind, or get financially repressed -Zoltan Pozsar
Crude oil about $32 at the moment.
Dow futures down about 900.
My Adolph A. Weinman signature
dollar index down too.
i'd place my bet on dollar index and getting killed in the market futures over the massive dive on oil futures.
gasoline futures down from about 1.39 to 1.16
sugar, which recently was said to be in a supply crunch, has dropped 3% tonight.
Always a good sign for gold, currently beating the $1700 door.
Keep an open mind, or get financially repressed -Zoltan Pozsar
So, with a rapidly declining equity market weighing heavily on Fed decisions, what is their next big move? gotta be a hammer or two left in the tool box before they just outright buy the S&P.
Keep an open mind, or get financially repressed -Zoltan Pozsar
the 30 year bond PRICE futures closed at 178+, they are now at 183+
Thanks for the collapse. I hope everyone gets rich!! Semper Fi!!!
The whole worlds off its rocker, buy Gold™.
and by something you can only see with a microscope!
Like they say, it's the little things in life.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Make sure you sell some this time, you certainly can't eat it.
The whole worlds off its rocker, buy Gold™.
Hardly anyone will get rich. More reasonable goal is to not become poor.
yes, an insurance policy.
Keep an open mind, or get financially repressed -Zoltan Pozsar
This is more Russia (and US) than SA. SA will become unstable at $30 oil despite their low input costs. Russia wants to crush US shale in retaliation for various sanctions. Expect prices to go back to $40+ shortly, or expect major political instability.
Saudi's forced collapse of OPEC is not only the trigger for current price failure, it will affect the price of oil for years to come. Sure, the other non-US producers will benefit if US shale takes a serious blow, but without OPEC, price recovery will take some time. The world is awash in oil and supply will not go away any time soon. Removing price/supply controls with the defeat of OPEC will open the floodgates.
Keep an open mind, or get financially repressed -Zoltan Pozsar
https://www.cnn.com/2020/03/08/investing/oil-prices-crash-opec-russia-saudi-arabia/index.html
@derryb... I agree. Downside is that US oil independence isn't necessarily profitable. Do you think there will be any upcoming bailouts to shale oil/gas?
No, Fed has its hands full. OPEC's price controls were shale's only hope for a bailout.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Still, it seems like most passive investors are completely complacent over the bubble (of everything imho) that has been pricked. S&P500 futures are bumping up against the 5% limit this evening. Triggering a circuit breaker or two tomorrow... would that cause some worry? The Fed has another 50 (or 75) basic point cut ready for next meeting. But if they unleash it early this week, it may create even more panic. Trouble is, you cannot (Fed, WH) scream that US economy is on sound footing and then come rushing in every time wall st cries.
@RobM said: Trouble is, you cannot (Fed, WH) scream that US economy is on sound footing and then come rushing in every time wall st cries.
Agree. In fact, the economy is on pretty sound footing; the Fed should stop trying to fine-tune it. It can’t be done. Interest rate cuts are useless, possibly worse than useless.
I would argue the economy only appears to be on sound footing. It has been built on a massive foundation of debt that will be called in. We may very well be witnessing the initial stages of it.
Face it, if the corona virus can cause this much economic carnage, it makes one question how solid the economy really is. . . something many of us here have been questioning all along. It makes us realize that not only consumers are living paycheck to paycheck; producers appear to be in the same boat.
It may just simply be that credit limits have been reached. This is something that can be temporarily fixed with more money creation, but only for the short term. I suspect the markets are also telling us that we have reached the end of the last short term.
Keep an open mind, or get financially repressed -Zoltan Pozsar
US can withstand these garbage countries from swaying prices. Doesn't matter if its Russia, Saudi Arabia, Iran or another 3rd world s***hole. How well did it work out for Saudi Arabia years ago? The US will always lead via innovation and technology like fracking and other methods like we do with everything else. The US has domestic demand that can buoy our domestic oil industry. If only we had more refineries....
Russia, Iran and Saudi Arabia will be dealing with violent protests soon enough, so I hope all their leaders enjoy.
Yet I can remember when American consumers were held hostage in the gas lines by OPEC during the early 70's.
Keep an open mind, or get financially repressed -Zoltan Pozsar
I did not read all of the above.
Just wanted to say that I am feeling it is time to see gold and buy equities.
Don’t try to catch a falling knife.
Monday 3/9 looks brutal!
JMHO.
Today (3/9/2020) looks to be shaping up as a very interesting day on the market....Futures down dramatically ....virus panic in the media, and Saudi/Russia oil issues.... Wow...Cheers, RickO
10 year yield is below 0.5%. The shale business is in trouble. I'm sure that the Plunge Protection Team is coordinating a remedy.
I've always wondered how letting the banks create money so that the banks can purchase stock shares (in order to prop them up) can be justified by anyone. It's corruption of the highest order. Actual working people have to work hard to earn money to buy those same stocks.
More money creation should be somewhat good for gold.
I wonder how pension funds are planning to make payouts when their models are based on 7% or 8% annual returns. Bailouts & even more money creation.
Welcome to the Twilight Zone.
I knew it would happen.
Sounds like the house of cards is ready to fall.
Trading halted shortly after the bell, dang.
Digital gold may be the way to go.... broke.
By digital gold i meant virtual currency, not gold ETFs.
For those that are holding stocks in this environment, what is your exit plan?
looking forward to 1.80/gallon gas
@jmski52 said: I wonder how pension funds are planning to make payouts when their models are based on 7% or 8% annual returns. Bailouts & even more money creation.
The private is mostly OK due to the shift away from defined benefit plans, and the fact that private sector pensions are rarely indexed for inflation. But many state pension plans were in dire shape even during the equity market run-up. Even if the market doesn't tank another 20 - 30 %, this will have to shine a light on state pension plans. It is of course widely known that many states (notably IL, NJ, CT) are bankrupt if pension liabilities are accounted for. There's no room to raise taxes. It will be extraordinarily contentious, as baby boomers with meager 401ks retire and see their state and Federal worker friends comfortably retired. Fortunately or unfortunately, even with a steep market decline, most states have enough cash to continue to ignore the problem for a while. But, ultimately, there will be a combination of benefit cuts and, as jmski52 says, bailouts and money creation.
I'll be picking up some more stock actually. Blood in the streets and all...
For those that are holding stocks in this environment, what is your exit plan?
I'll be picking up some more stock actually. Blood in the streets and all...
Most stockholders are still in the black, due to the long market rise. There isn't really any blood in the streets - yet. I'd probably pay some attention to P/E ratios if I were interested in buying the stock market. How are valuations these days?
I knew it would happen.
Worst single day loss since the Gulf War, it was a beating then taken behind the woodshed for another one. My 401k down 11%, reduced my withholdings to 1%, rather have the cash in hand then watch it disappear.
like jmski says "I knew it would happen."
The fragility of Wall St. markets has been pointed out here for quite a while. Currently driven by virus fear. Just wait til the fundamentals float to the top. I believe the run for the exits will overpower the Fed's efforts. Just look what the .5 rate cut gave us. I know, it woulda been worse, but my point is the stampede is too great.
Keep an open mind, or get financially repressed -Zoltan Pozsar
TVIX maybe? Since I re-positioned a few weeks ago, I picked up a new avatar.
Keep an open mind, or get financially repressed -Zoltan Pozsar
To not exit
Keep your powder dry. It may take a long time... but you'll be able to buy stock like a mini Warren Buffett When the market really bottoms.
I regret not loading up on stock during the 2008 market crash.
https://www.ott.ct.gov/pension_yearinreview.html
5.88% return in 2019.
The S&P500 returned over 30% in 2019. The CT pension return is dramatically lower, even if they are statutorily required to have significantly more conservative investments. This is an embarrassing return compared to the rest of the market or other institutional funds. 2% over inflation is nothing to be happy about...and will never cut it. BND or VBMPX (bond funds) with a .03% or .04% expense ratio returned almost double what the CT managed funds returned...and the CT managed funds are probably pulling .5-1% in expenses.
So, yay and congrats?
Liberty: Parent of Science & Industry
For those that are holding stocks in this environment, what is your exit plan?
If I owned stocks (which I do not), I would exit the same way I got in - gradually and in a tax-managed fashion for any gains. Always keep a cushion of liquid cash to buffer market gyrations to some degree.
Keep your powder dry. It may take a long time... but you'll be able to buy stock like a mini Warren Buffett When the market really bottoms.
I regret not loading up on stock during the 2008 market crash.
A couple of points.
First, buying stocks at exactly the market bottom (like a mini Warren Buffett?) requires that you know exactly when that is. So, if you know exactly when that is, you are doing better than probably 95% to 99% of the rest of us - including the so-called professionals.
Second, what is the reason you did not load up during the 2008 market crash? If you think back clearly, I'm guessing that the reason was likely to have been the fear of a further market decline and the potential losses which kept you from diving into the pool headfirst.
Some things are simply not predictable in advance, such as 10 year's worth of QE. We might have suspected that the jellyfish politicians would opt for bailing out their buddies in the banking system and then saddling the taxpayers with unpayable amounts of leveraged debt - but most people wouldn't have been willing to bet the farm on it.
I knew it would happen.
thanks, I called the bottom on avatars.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Many are saying this 1000 point upward swing is a sign of normalcy, is it happy days after one day?
Didn't Illinois just legalize all forms of marijuana? I thought this was going to fix their budget and pension problems
Its called "pushing on a string." Buyers are buying the hype (tax cuts this time), but will soon be selling it.
Keep an open mind, or get financially repressed -Zoltan Pozsar
@derryb love the new avatar.
Didn't Illinois just legalize all forms of marijuana? I thought this was going to fix their budget and pension problems
I think that's what Illinois said when they legalized the state lottery many years ago.
I knew it would happen.
Boeing stock is looking pretty good. I like it $150 more...