Financial topics

[Higgenbotham]

Crude oil and stock prices now

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[Higgenbotham]

The chart above seems to show a second, smaller Triangle of Doom.

In this one, the price has been trying to get over $105 per barrel but the consumer is too weak to pay it, so it backs off. But it backs off by a smaller amount each time, as the oil producers costs relentlessly go up due to the QE inflation.

The oil producers must get paid and they must make a profit to continue operations but the beleaguered consumer can't pay it.

So what has happened? Well, we can see in a's link that as oil prices hit $105 per barrel the second time around in April, consumer debt skyrocketed. And it could be that at some point, the consumer will be tapped out on debt and then really unable to pay the $105 per barrel.

Therefore, what can be imagined is that oil prices are going to push through $105 because the bottom line is that the producers must get paid and must make a profit to continue operations. When price breaks out over $105, the speculators are going to pile on. Then the economy is going to collapse shortly thereafter.

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[Higgenbotham]

http://www.marketwatch.com/story/oil-pu ... genumber=1

This is the offical line. Everyone can draw their conclusions and it would be interesting to hear other views. My view is that they threw a pile of crap together to try to give a rosy view as to why the oil price went up today but they really don't have anything to base it on. The bottom line is that producers need higher prices and OPEC is meeting Wednesday.

OPEC members will hold their official meeting in Vienna on Wednesday. OPEC’s 30 million barrel-per-day production ceiling has been in place for at least the last two years — a level that’s largely expected to be maintained, but members will have plenty to discuss.

http://www.marketwatch.com/story/oil-in ... 2014-06-06

As OPEC members prepare for their first meeting of the year this Wednesday, they’ve already found a price target and output quota for oil that actually works, even in a market that’s had to deal with turmoil in the Middle East, tensions with Russia over Ukraine, near-record crude supplies and rising production in the U.S., and a slowdown in Chinese economic growth.

That’s quite a feat and one that’ll take a lot of finessing to keep.

“OPEC members are quite comfortable with current oil prices,” said Chad Mabry, energy analyst at MLV & Co. “Not only have prices remained elevated but there has been very little volatility.”

“In our view, this is a sweet spot: any higher and we would be concerned about demand destruction, any lower and prices would approach OPEC members’ marginal cost of production,” he said, adding that MLV estimates OPEC is “content” with prices at $100 to $110 a barrel, based on the OPEC basket.

That was this morning before prices rose.

[aedens]

https://www.youtube.com/watch?v=QJhVM930YXY

and that you esteem them very highly in love because of their work. Live in peace with one another. We urge you, brethren, admonish the unruly, encourage the fainthearted, help the weak, be patient with everyone. See that no one repays another with evil for evil, but always seek after that which is good for one another and for all people.…

The revolution is between humanity's ears... and they don't want the responsibility.

Judge Davis of the United States Supreme Court:

"The Constitution of the United States is a law for rulers and people, equally in war and in peace, and covers with the shield of its protection all classes of men, at all times, and under all circumstances. No doctrine, involving more pernicious consequences, was ever invented by the wit of man than that any of its provisions can be suspended during any of the great exigencies of government. Such a doctrine leads directly to anarchy or despotism. Wicked men, ambitious of power, with hatred of liberty and contempt of law, may fill the places once occupied by Washington and Lincoln; and if this right (the right of the executive and his military subordinates in time of foreign or domestic war to substitute martial law for the civil law) be conceded, and the calamities of war again befall us, the dangers to human liberty are frightful to contemplate."

I will never surrender to tyrants.... and he did not either....

Nothing new under the Sun as Daniel chapter 2 goes hand-in-hand with Psalm 83. As you watch and read world news, notice the problems we already knew from the above.

[aedens]

Then will add on the way down if it starts to give way...

Exhaustion leg is seen h by some. We had that discussion today internally with family.
I will wait and add after the later July window we seen from long before.
As you note plainly the triangle is certain and the "wasting" is no accident ...
To be clear we are in hold, and dividend reinvestment on level one assets.

https://www.youtube.com/watch?v=9Ll3TaVmIfk

[aedens]

As noted from the clearing of the river conversation after the July view will recheck. T have done much justice to this topic.

As noted some time back in our view we are still waiting for them to lower the level and remove the flow obstruction.
The issue was deeper than I garnered to other cluster group dynamics of implication. That is why I will wait.
I am not worried on our capex or opex these next two quarter on some internal metrics.
I guess the proper term would suffice as winter is coming.

thread context: http://gdxforum.com/forum/viewtopic.php ... ver#p17599

and the point you noted ---- "Or another way to think about it is what happens when you jump from the 20th floor all at once instead of taking the stairs down from the 5th floor (where you should have been to begin with) to the 3rd floor."

That would have to do with whether hard limits to profits apply or whether it is possible to extend the larger picture by stagflating an industrial economy. History shows that it is possible to stagflate an agricultural economy but there are a lot of reasons for me to expect that when people have to eat they don't close up shop versus when they have an unprofitable business they do close up shop.

http://www.funddata.com/evpdf/BY7VL.pdf in august will pick this apart to inertias.

Been a few years but here we are imo....

[aedens]

Crude oil and stock prices now

CRUDENOW.png

SPXNOW.png

http://www.zerohedge.com/news/2014-05-1 ... stating-us

qe might just enable
we will hope the repo does not bump heads with much else.
bulls eye is coming soon

[Higgenbotham]

and the point you noted ---- "Or another way to think about it is what happens when you jump from the 20th floor all at once instead of taking the stairs down from the 5th floor (where you should have been to begin with) to the 3rd floor."

That would have to do with whether hard limits to profits apply or whether it is possible to extend the larger picture by stagflating an industrial economy. History shows that it is possible to stagflate an agricultural economy but there are a lot of reasons for me to expect that when people have to eat they don't close up shop versus when they have an unprofitable business they do close up shop.

The two processes appear similar in that more is extracted out of the ground than can be replaced to maintain a steady state condition.

It may be that the excess extraction rate initially exceeds the replacement rate required to maintain steady state approximately proportionally to the growth of the population. The growth rate of the population was approximately 0.1% per year in Roman times versus 2% per year in these late Industrial Age times. There would be a point where the population has grown sufficiently to consume the replacement that nature provides to those resounces that are renewable. At the time that point is hit, if the population is growing at a rate of 2% versus 0.1%; with all other conditions being equal, the first year drawdown is occurring at the relative rate of 2% divided by 0.1%. This would mean that the drawdown of the renewable resource where the Industrial Age population is growing 20 times faster than an Agricultural Age population will proceed 20 times faster, approximately, during year 1 of drawdown. This would relate to things that directly affect food production such as soil and water.

Bill Gates and others say this is not like Roman times because of all the great technology we have. To that point, let's talk about some of this great technology and how it relates to the drawdown of the resource. I only see technology that works to draw the resource out faster; for example, irrigation in the Midwest that draws down the aquifers, or fracking that draws down the oil resource. Both of these then allow the renewable resource excess extraction rate to be maintained at a higher level than would otherwise be possible. There does not exist any great technology which is putting water back into aquifers or increasing stores of liquid fuels (unless it depletes the other resources - ethanol for example). Most of the enhancement of soil is done with fossil fuel derived products.

In Roman times they were extracting out of the ground whereas now the extraction is out of the earth in the form of energy, which then enables faster rates of extraction out of the ground. I think it is the rate of extraction and the differential between the rate of extraction prior to collapse that will make the difference in the speed of the collapse, as well as the points noted earlier that are the practical points as to how that may happen in reality. In an agricultural economy, during the collapse, people get less food and there is a process of attrition that lasts a long time - decades or centuries. Even separating the rest of our economy from the agricultural economy and considering just that process, the layering of the industrial economy onto the agricultural economy allows for agriculture to deplete at a much faster rate than was observed historically during previous collapses.

So while I read that "the way to picture how a collapse will take place is to read about how that process has historically occurred" I doubt very much that will be the case. That would be especially true given how the Central Bankers are running the hamster on the wheel at maximum speed.

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[Higgenbotham]

About 10 years ago, I got a copy of The Limits to Growth: The 30 Year Update. At that time, I was not really visualizing a collapse. I wanted to make myself aware of various ideas though because I was visualizing a Depression similar to the 1930s. We had a lot of wacky stuff ahead of us from that standpoint. So I thumbed through the book, looked at the graphs, and put it back on my shelf. It looked boring.

Tonight I have been searching for some material that covers the post I made above. Really, I'm not finding much through key word searches. There are some discussions related to aquifers.

But in taking Meadow's book off my shelf, the most pertinent discussion I can find is in there. For example, Chapter 2 is The Driving Force: Exponential Growth. Being interested in history, which is what led me to this site in the first place, I never realized how the driving force between the collapse of the Roman Empire and the current condition is so different. I had always considered human nature to be the driving force which of course that aspect is important but the differential in the growth rate is also.

[Higgenbotham]

Not sure where I found this graph. It may have been in an article that included or discussed a recent interview with Dennis Meadows.

I'm sure his insights are much better than my 2 cents. But I did do an original effort above without having read his existing theory so will see how they are different. The article was talking about the fact that his orginal intention in publishing the work was to get people to be proactive.

One of the points I seem to recall is that once peak is hit, the model is not predictive, so the decline rates shown on the graph will not be accurate.

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