RE: RE: Volume..."Oil and Gas going down. Poor economy = less demand."
That;s to simplistic a way to look at it, although it seems like it SHOULD make sense, there are much more complicated forces at work.....and in the coming months, there is going to be a way to profit mightily from it.....I'll explain:
Oil and Gas, in the current economic climate, are two different animals. There are forces at work that will push oil, gold, and stocks up as long as the economy is doing poorly (weird, I know) ......you'll notice I left gas out of this, as it is just plain f*cked.....and even though this post doesn't really have much relevence to gas, you can make a lot of money if you listen to it.....
First of all, read this article....it's written by a very respected economist, and what he says is exactly right.....you dont need to understand all of it to get the jist....
https://www.theglobeandmail.com/globe-investor/mother-of-all-carry-trades-faces-an-inevitable-bust/article1347932/
Basically in a nutshell, we have right now the largest short postition in the USD ever in history. The reason is, due to the cheap money of the 0% interest rates, people have been shorting the USD and using the cash generated to buy all risky assets...stocks and commodities. THAT is why oil and equities have rallied since March, not because of any great fundamentals.....As the writer says, the USD cannot fall forever.....when it stabalizes (which is entirely in the hands of the Fed...the minute they tighten interest rates, the asset-orgy will end) these people are going to need to cover their short positions.....to do that, they are going to liquidate their assets they bought with their short proceeds....when that happens, commodities and stocks are going to fall fast and hard......ironically, that will be the start of a healthy economy again.
Which brings me back to my original point about the very bizarre realtionship (commods and stocks will rise until the economy is back on track).....because as long as interest rates are where they are, the risky assets will go up....it is why oil was down $2.50 an hour ago on terrible employment numbers, but only down $0.50 now......because the terrible numbers mean no interest rate rise is coming soon....
The Fed said two days ago in their rate report that they will keep interest rates where they are until they see a significant improvement in the economy especially more jobs.....they know they have to do something soon - all of this free money ios creating massive bubbles in commods and equities - but they can't risk it until they are sure the economy is out of the woods.
So what you should look for is when we have 2-3 months of shrinking unemployment....this looks like it may happen sooner rather then later....once that happens, equities and oil will probably reach YTD highs....that is when you should strike...you can just short the S&P, oil, gold, if you want.....me, I'm going to be buying a whole lot of bearish puts to take advatnage of leverage......because all of these assets will be doing very well, the puts should be cheap...very cheap. The risk will be minimal....
As long as the jobless rate is still going up, the rates will stay the same....even though bad economic news SHOULD keep a lid on asset prices, it won't. There is too much free money to be made shorting the USD, and all these people need a place to put all that money. That's why risky assets will go up....they are al;ready in a bubble, and it will get biger.....BUT, as soon as the gov't feels the economy is strong enough to handle higher rates, they are going to raise them as soon as they can. The day this happens, all asset values are going to drop like a stone, as massive positions are liquidated. If you time it right, you can make an absolute killing here.....I'm talking a fortune. It could be the oppourtunity of a lifetime, if you know what you're doing.
It's important to note that this massive sell off of assts is not going to be a bad thing i.e it will be the start of sustainable prosperity, not another recession.......right now, stocks are overpriced by about 40%, and oil SHOULD be in the $50-$60 range, based on the fundamentals.....all the crash will do is bring asset prices back into equilibrium....this will coincide with unemployment, and a massive tightening of all the liquidity the Fed has pumped into the system.....which will all contribute to us returning to a healthy, funtioning economy and market....