Posts Tagged ‘energy prices’

That 70′s Show

That 70′s Show

Courtesy of Joshua M Brown, The Reformed Broker 

With asset prices, sentiment, employment and housing values dropping or stabilizing at low levels, why is it that much of the fear is still centered around the spectre of inflation?  Perhaps it is reallystagflation, brought about by a resumption of climbing energy prices and a continuation of the jobless recovery, that we should truly fear. 

Stagflation, of which there is mercifully no evidence right now, could be the kill shot that ultimately drops this demi-corpse of an economy to the ground.  Looking at the uptick in energy prices this week, I am reminded of all the stuff I’ve read about stagflation and the 1970′s.  And even though the 70′s gave birth to Star Wars, Paul McCartney’s work with Wings and that Farah Fawcett poster (you know the one), we probably don’t want to repeat that stagflationary decade if we can help it.

To be clear, many inflationistas are only calling for inflation based on their read of what central banks will do to counter deflation.  Many are predicting Quantitative Easing Part II and perhaps the White House’s $30 something billion Unemployment Relief hail mary is the first sign of it. 

If you believe, as they do, that the pendulum always swings too far in both directions, then you may want to have a look at the above chart, 30 years of data on what CPI inflation does to GDP.  Pay particular attention to the 1970′s, as high energy and other prices sent the economy off a cliff until they were brought under control by a gladiator named Paul Volcker.

The message is to be watchful of energy prices.  If there is one thing American businesses and consumers don’t need right now, its a return to 2007-2008 prices at the pump.

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OK, I know you were expecting it when you read the post title… "HELLO, WISCONSIN!" 


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CPI Negative 3rd Consecutive Month; Selective Memory; Perverse Effect of Falling Energy Prices on Imputed Housing Costs

CPI Negative 3rd Consecutive Month; Selective Memory; Perverse Effect of Falling Energy Prices on Imputed Housing Costs

Courtesy of Mish

As expected, as least as I expected, the Consumer Price Index for June shows the seasonally adjusted CPI was Negative 3rd Consecutive Month.

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 1.1 percent before seasonal adjustment.

Similarly to April and May, a decline in the energy index caused the seasonally adjusted all items decrease in June. The index for energy decreased 2.9 percent in June, the same decline as in May, with a decline in the gasoline index accounting for most of the decrease. This more than offset an increase in the index for all items less food and energy, while the food index was unchanged for the second month in a row.

The index for all items less food and energy rose 0.2 percent in June after increasing 0.1 percent in May. A broad array of indexes posted increases, including shelter, apparel, used cars, medical care, tobacco, and recreation. These increases more than offset declines in the indexes for household furnishings and operations and for airline fares. The 12-month change in the index for all items less food and energy remained at 0.9 percent for the third month in a row.

One Month Change in CPI-U 

12-Month CPI-U Change vs. Year Ago

Oil and the CPI

For, now the CPI (less food and energy) has been hovering near +1% for about a year. However, it is not really valid to exclude food or energy but the Fed does it to justify their inflationary policies (policies that clearly are not working now).

The jump in "all items" in the second chart reflects the rebound in oil prices in Spring-Summer of 2009 when crude soared from $35 a barrel to close to $80 a barrel.

Of course hyperinflationists were screaming every step of the way, conveniently ignoring the plunge from $140 to $35.

Selective Memories

When it comes to prices, people have selective memories. They remember every penny uptick in gasoline prices, but forget the times they drop. The same applies to most everything else, but energy is very noticeable because people are constantly filling up their tanks.

On…
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Going Nuclear: Obama’s Green Machine Is Ready to Go

Going Nuclear: Obama’s Green Machine Is Ready to Go

By Marin Katusa , Senior Market Strategist, Casey’s Energy Opportunities

Over the Easter weekend, seven nuclear reactors throughout the United States stopped operations, and natural gas prices skyrocketed by over 20%. And this was when most of the country was enjoying mild weather and businesses were shut for the long weekend. 

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Now traders are out in force looking for the cheapest possible power ahead of rising demand, and the power markets are heading one way: up. 

No Homer Simpsons Allowed Here!

It is unfortunate that nuclear power plants are still linked in our minds to the Three Mile Island and Chernobyl disasters. While these were some truly horrific events, we’re failing to realize one very important fact: we’ve learnt from our mistakes. The next generation of nuclear plants are better designed and more safety measures have been put into place than what was there in the plants from the 1960s and 1970s. There is always some operational risk, but that is present in every power plant, be it coal, natural gas, geothermal, or nuclear.

Currently, the United States houses roughly 24% of the world’s nuclear reactors, and they account for about 20% of the power generated in the country. That’s one in every five homes being powered by nuclear energy. This number is a lot higher for some states, with New Jersey getting almost more than 50% of its power from nuclear energy. With renewed interest in nuclear power in the U.S. and President Obama guaranteeing loans for two new reactors this February, it’s pretty clear that the nuclear share in the energy pie is set to increase.

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It’s Clean, It’s Green, It’s the New Obama Nuclear Machine

Though they vary in design, nuclear reactors operate on the same basic principle: the energy released by nuclear fission heats water to produce steam, which turns the turbines that generate electricity. The silver lining: no fossil fuels are burnt at any stage, so almost no greenhouse gases are produced. They are, however, expensive to build and it can take years. But once in operation, fuel costs are very low, which translates to low maintenance costs, and each plant can easily operate for up to 60 years. Running at around 90% capacity, nuclear power plants are workhorses that shut down only once every 18 months for refueling and maintenance. 

The…
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Forget $100 oil. $80 oil is a problem

As The Reformed Broker noted in the last post, and as Phil has mentioned many times, while oil and stock prices are currently rising together, increased energy prices are not typically good for the consumer. – Ilene

Forget $100 oil. $80 oil is a problem

Energy prices don’t need to rise that much before a fragile consumer-led economy could face another setback.

Oil can and graph with American dollar

By Colin Barr, Fortune

Are cash-strapped American consumers on for another date with energy price misery?

The U.S. economy remains weak and one in six Americans can’t find enough work. Yet oil prices have risen steadily this year. A barrel of crude costs $79 and change, more than double its price at the end of 2008…

That could complicate recovery in an economy that, despite the tumult of the past two years, remains as consumer-driven as ever…

What’s more, the factors behind this spike seem apt to persist for some time. They include a pickup in global economic activity fueled by massive government spending, a decline in the purchasing power of the dollar as the U.S. holds interest rates near zero, and lack of new oil supplies coming online to meet future demand…

"Any time it gets above $3, it’s worth watching," said James D. Hamilton, an economics professor at the University of California at San Diego. "When you get to that level, you start to see a change in behavior as budgets get squeezed."

Hamilton said the $3-a-gallon price is noteworthy because it’s around the level at which consumers are devoting 6% of their budgets to energy costs. Hitting that point in recent years seems to have prompted Americans to pull back…

"The price of oil played a bigger factor in the recession than people seem to be remembering," Hamilton said.

…Kopits warns that every recession since 1972 has been associated with an oil price surge that took U.S. oil consumption past 4% of gross domestic product. Today, he said, the magic number to get there is $80.

Full article here.

 


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Retail sales disappoint … again

Retail sales disappoint … again

Courtesy of Tim Iacono at The Mess That Greenspan Made

The Commerce Department reported(.pdf) that, after rising 0.8 percent in June, retail sales fell 0.1 percent in July, disappointing analysts who were expecting a gain of 0.8 percent.

IMAGE

The wildly popular "Cash for Clunkers" program saw motor vehicle sales surge 2.8 percent, but broad declines in other categories pulled overall sales lower, paced by a 2.1 percent decline in sales at home building material and garden equipment stores.

Gasoline station sales also declined 2.1 percent, but this was largely due to lower prices at the pump during the July reporting period.

Excluding motor vehicles and parts, sales fell well short of the consensus estimate of a 0.1 percent gain, down 0.6 percent in July after rising 0.5 percent the in June.

On a year-over-year basis, retail sales are now down 8.5 percent.

The fallout from the bursting of the housing bubble is clear to see in the ongoing sales decline at building material and home improvement stores as, aside from volatile gasoline station sales, this category is worse than any other on an annual basis, down 14.7 percent from a year ago.

IMAGE

Interestingly, sales at electronics and appliance stores are down 14.6 percent from a year ago, presumably due to a lagging household appliance sector rather than consumer electronics such as iPhones and iPods which still seem to be flying off of the shelves.

It’s hard to imagine how a bigger bubble than the housing bubble could ever be created as this particular bubble had so many second-order effects on the economy, the area shaded in gray in the graphic above being one of the major ones.

 

 


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Phil's Favorites

What China wants: 3 things motivating China's position in trade negotiations with the US

 

What China wants: 3 things motivating China's position in trade negotiations with the US

Courtesy of Penelope B. Prime, Georgia State University

Relations between the U.S. and China have deteriorated sharply in recent days after trade negotiations broke down, leading some to suggest we are on the cusp of a new “cold war.”

President Donald Trump blames the resumption of hostilities on China. Specifically, he and his negotiators say their Chinese counterparts backtracked on an agreement to change laws aimed at enforcing the ...



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Zero Hedge

White House Planned To Use Huawei As Trade 'Bargaining Chip'

Courtesy of ZeroHedge

If there was any lingering doubt that President Trump has treated Huawei like a 'bargaining chip' during trade talks with the Chinese, Bloomberg just put the issue to rest.

In a report sourced to administration insiders, BBG reported that the Trump administration waited to blacklist Huawei until talks with the Chinese had hit an impasse, because they were concerned that targeting Huawei would disrupt the talks.

...



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Kimble Charting Solutions

Commodities; Long-Term Bottom Being Created This Month?

Courtesy of Chris Kimble.

Is the Thomson Reuters Equal Weight Commodities creating a long-term bottom? What the index does at (3) over the next few weeks, will go a long way to answering this important question!

Commodities don’t have much to brag about over the past 8-years, as lower highs have taken place since the peak back in 2011. After the peak in 2011, they have created falling channel (1).

The index hit the top of this channel the prior two months at (2), creating back to back bearish reversal patterns.

Softness this month has the index testing 2017 lows and rising support at (3). While ...



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Insider Scoop

Off-Roaders Are In Buying Mood, BMO Says In Polaris Upgrade

Courtesy of Benzinga.

A long winter and the worst of the U.S.-China trade war may both be in the rearview mirror for off-road vehicle maker Polaris Industries Inc. (NYSE: PII), BMO Capital Markets said Tuesday.

The Analyst

Gerrick Johnson upgraded Polaris from Mark...



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Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

Reminder: We are available to chat with Members, comments are found below each post.

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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