Saturday, December 3, 2016

Voodoo Moron-O-Nomics At Level 11

Dumbfuckistan bought Forrest Trump's 1950s corruption rally with both hands, now that he handed the U.S. government over to the Koch Brothers to run. Selling out their children was a push of a button...

Unfortunately, all of the 1950s industries exhibit the exact same problem - massive overcapacity due to lack of demand. The ink is not even dry on the OPEC "deal" to reduce global oil production and already mega-dunces are talking about increasing capacity in the U.S. oil sector. You can't make this shit up... 

WSJ Dec. 3, 2016

I don't think that's going to happen, because over the past two years over-investment of 0% poverty capital has made the industry more efficient and less labour intensive:

The Guardian, Dec. 3, 2016
"The return to action of once-idle derricks on the Texas and Dakota plains is the result of efficiency savings that have seen large jobs losses and a more streamlined approach to drilling from the US industry, after the post-2014 price tumble rendered many operators unprofitable. Only a few years ago, many firms struggled to make a profit at $70 a barrel. Now they can be competitive at much lower prices, with many expecting $50 for West Texas Intermediate"

In other words, $50 is very likely the new ceiling for oil:
As of last week (pre-OPEC) commercial oil shorts are at the third highest level ever, as U.S. producers sell this entire rally with both hands. 

WTI at $51.68 on the highest daily ETF volume EVER (and the highest 3x leveraged ETF volume ever), to end the week lower than it was six weeks ago, is not overly impressive for a deal "two years in the making"...

And as far as oil demand goes, while this OPEC circle jerk was capturing world attention, the Trump dollar rally was underway. Now we see that the inverse dollar and oil have quite a divergence. Meaning that the price Emerging Markets, the marginal consumers of oil, pay for oil just went up. A lot...

Getting back to the theme of this post, Trump-o-Nomics is really just Supply-Side economics on steroids. Because when a bad idea fails for three decades straight, why not go ALL IN at the end?

"Stare deeply, and repeat after me, Globalization is working. All we need is more investment to fix this over-capacity problem."

Commodities with global GDP growth:

U.S. net exports and Federal Debt aka. "Voodoo Economics"