Thursday, January 28, 2016

Mutual Assured Bankruptcy aka. Idiot's Dilemma

In an economy where everyone only thinks of themselves, then everyone goes bankrupt. "Self-interest" is not a philosophy, it's an instinct, like two dogs fucking on the lawn. It's what they do...

"Dude, you outsourced our fourth quarter"
As it is with corporations outsourcing everything to China, when one company does it it's great for profits. When they all do it, say goodbye to revenue...

What is happening in the oil industry is predicted by game theory's "Prisoner's Dilemma". Basically everyone wants to cheat at everyone else's expense. OPEC only controls 40% of global oil output. They can't even enforce quotas within their own cartel much less outside of the cartel. Belief in a global production agreement is a first order fantasy.

Emerging Market stocks with oil stocks:

The Saudis want a "Lehman-event' in oil, to wipe out their competitors, and they are going to get one...only because, like the average dunce, they have no clue via Globalized financial linkages that they will lose as much or more than anyone else, once all of the dominoes begin to fall...

BBG: January 25th, 2016:

"The pattern of the decline in the price of oil that began in mid-2014 is remarkably similar to the 2007-2009 pattern of the price decline of ABX, the credit derivative index that referenced subprime mortgages and, ultimately, the U.S. housing market (Chart 1). The ABX history suggests that oil will see more declines in the next couple of months and find a floor somewhere in the low 20s"

“It is not the role of Saudi Arabia, or certain other OPEC nations, to subsidize higher cost producers by ceding market share,” Oil Minister Ali Naimi told an audience in Berlin in March.