The question on the table is who is dumber - The Central Banks, or the gamblers believing this will have a happy ending? Either way, this latest gambit is a new level of dumb even by Idiocratic standards:
"What is clear as 2019 begins is that the Fed, which is still penciling in two rate hikes for next year, and markets are woefully out of sync. This may be unavoidable with a data-driven Fed looking backward and markets looking forward, but the gap seems to be widening."
Other central banks seem to be similarly out of sync. The European Central Bank (ECB) went ahead with its plan to stop buying government bonds at the end of 2018 even though two of the biggest eurozone economies, Germany and Italy, showed negative growth in the third quarter and everyone was lowering forecasts for 2019 for the area as a whole."
Now gamblers are going to discover the difference between fantasy and reality. One works on the way up. The other works on the way down.
Deja vu of early 2016, the oil industry is locked in a deflationary death spiral. Continually re-investing in its own demise. The most recent OPEC production cut goes into effect this week, three years since U.S. crude bottomed out at $26/bbl, compliments of the last OPEC cut production. In the intervening period, U.S. oil output has increased to historically unprecedented levels. This time around, the oil market doesn't believe that a 1.2 million bbl/day cut will cut it:
“At the moment oil prices have very little confidence that the Opec production cuts are enough to balance markets or help draw down on inventories,”
U.S. crude oil production is at record highs. Three years ago in early 2016 when prices stabilized, production was falling:
The problem for "balancing" supply in the global oil market, is that Wall Street has been financing a losing shale oil operation from its very inception - and every single day since. No economist or finance "expert" could ever predict this asinine scenario: The continual re-investment in collapse predicated upon imaginary future payback.
At the very peak of oil prices this past summer it finally seemed that profitability was within reach. And then oil prices dropped -45% in a straight line. Victim once again of over-investment in imaginary reflation:
June, 2018:
"The shale industry is on the verge of becoming profitable…for the first time."
[Despite oil at $100/bbl] "The industry amassed $200 billion in negative cash flow in the 2010-2014 period"
“Since its inception, the industry has been characterised by negative free cash flow as expectations of rising production and cost improvements led to continuous overspending in the sector”
Fracking stocks are back to their 2016 lows:
Junk bonds are re-imploding:
The Energy sector overall is at critical support from 2016
The OPEC cut would have been larger, but Trump was dead set against it. Even using dead journalists as leverage.
"The president has tweeted at the 15-nation producer group several times this year, blaming it for rising oil prices and ordering its members to take steps to tamp down the cost of crude."
Sadly, Ponzi economic models can't keep pace with the oil futures market:
