Oil? Uhh, is there a problem in the markets out there that has to do with oil? No – couldn’t be. Oh wait, there “was,” as in past tense…in other words, three whole days later there’s no problems now. Good times…good times.
There must have been insanely good, and new, fundamental news that hit the tape because the market RACED so much higher that even the perma-bulls on Fraud Street were shocked. Clearly the oil problem is gone – right? Let’s have a look at the recent news.
• Oil prices plummeted ~7% from its intra-day high. There was no bounce.
• US Services PMI plunged to 53.6, below expectations of 56.3 by the most on record, and is also the 6th month of declines.
• Markit’s PMI summary, “A sharp slowing in service sector activity alongside a similar easing in the manufacturing sector takes the overall rate of economic expansion down to the weakest since October 2013. The extent of the slowdown suggests that economic growth in the fourth quarter could come in below 2%.”
• Philly Fed data crashed from last month’s 40.8 headline to 24.5. Moreover, it missed the expectation of 26.0.
• Inside the Philly Fed report we read “Firms were less optimistic about employment increases over the next six months and concerns about rising health care costs continue to be reported.”
• Bloomberg reported that “Saudi Arabia and OPEC would find it ‘difficult, if not impossible’ to give up market share by cutting crude production, the country’s oil minister said.” NEVER MIND – oil worries are behind us. My bad!
• The same Saudi oil minister said that the slide in oil prices are due to demand. Said otherwise: global economic growth is slowing. Bullish, right?
• Emerging market debt yield spreads vs. AAA-rated US corporations have nearly doubled in the last few weeks, which is raising eyebrows because Euro banks are on the hook for many of their loans. I wonder if plunging oil prices have something to do with this? Nahh, impossible. No worries.
• Will Russia default again because of the oil slide? Would that impact bankers?
• Small oil firms, like Comstock Resources, are suspending oil drilling (and laying off highly paid employees) because of low prices.
• But large industry is being affected too – “The US-based oil giant ConocoPhillips is cutting 230 out of 1,650 jobs in the UK. This month it announced a 20% reduction in its worldwide capital expenditure budget, in response to falling oil prices…Other big oil firms are expected to make similar cuts to their drilling and exploration budgets. Research from the investment bank Goldman Sachs predicted that they would need to cut capital expenditure by 30% to restore their profitability at current prices.”
• According to Robin Allan, chairman of the UK independent explorers’ association Brindex, the industry was “close to collapse – It’s a huge crisis…”
• Hmm, so now that’s the UK, Canadian, Venezuelan, Norwegian, Mexican, and US oil firms that are being negatively effected, which are already said to be impacting GDP.
Clearly none of these (what’s the word the parrots and lap-dogs regurgitate on TV?) FUNDAMENTALS matter. Nope. No sir – none of it. After all, as reported yesterday, Janet Yellen changed three words in her statement and that’s all that matters.
It should be clear now for all to see what the markets have dissolved into: a hollowed-out shell of free markets; a sickening joke of puppet and puppeteer. The puppeteers are many actually, with a new one joining the fray last evening: The Swiss National Bank (SNB). Of course, the puppets are global stock and bond markets, jumping about like the sock puppets that they are, doing what ever the central planning puppeteers demand.
With the simple 3 word change in the FOMC statement and the SNB joining the global play of the other puppeteers – “NIRP” – the Dow skyrocketed +421 points Thursday. Nooo, the market isn’t rigged by the central bankers – right? Do the puppet masters really have that much power?
Yes, yes they do.