Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
The Death of Japan's Real Estate Dream - 21st Jul 18
SMIGGLE Amazing Mega Shopping Haul, Pencil Cases, Smigglets and Giant Back Packs! - 21st Jul 18
Cayton Bay Beach Caravan Park Holiday - What's it Like? - 21st Jul 18
Gold Stocks Investment Wanes - 20th Jul 18
Diversifying Your Stock Investing Strategies is Smart Investing - 20th Jul 18
Custom Global Stock Market Indexes May Be Sounding Alarms - 20th Jul 18
S&P 500 Just 2% Below Record High, But There's More Stock Market Uncertainty - 19th Jul 18
Stock Market Technical Picture - 19th Jul 18
Gold Market Signal vs. Noise - 19th Jul 18
Don’t Get Too Bullish on Gold - 19th Jul 18
Bitcoin Price Rallies to Upper Channel – What Next? - 19th Jul 18
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

The Next Recession Will Be Triggered By Crude Oil

Commodities / Crude Oil Sep 16, 2012 - 09:57 AM GMT

By: Toby_Connor

Commodities

Best Financial Markets Analysis ArticleI was confident that the Fed had already begun printing. That seemed quite evident by the overall action in the commodity markets, the dollar, and the fact that stocks were unable to correct in the normal timing band for a daily cycle low. However, I didn’t really expect Ben would come out and publicly admit it. That one took me by surprise Thursday. I guess Bernanke wants to get full value for his attack on the dollar and make sure that markets are rising into the election.


At this point all the pieces are in place for the inflationary spike and currency crisis I’ve been predicting for 2014. We now have open ended QE that is tied to economic output and unemployment. But since debasing currencies has historically never been the cure for the bursting of a credit bubble, all the Fed is going to produce is spiraling inflation. So as this progresses we are going to see the Fed printing faster and faster as the result they are looking for never materializes. This is what will ultimately drive the currency crisis at the dollar’s next three year cycle low in 2014.

At this point, watch the price of oil if you want to know when the next recession is going to begin. As I’ve pointed out many times in the past, recessions (well, at least since World War II) have all been preceded by a sharp spike in the price of energy. Any move of 100% or more in a year or less, has historically been the straw that breaks the camel's back. Modern economies cannot survive that kind of shock. It invariably triggers the collapse of consumer discretionary spending and economic activity comes to a grinding halt.

In 2007 oil surged out of the 3 year cycle low into a parabolic advance as Bernanke trashed the dollar in the vain attempt to halt the sub-prime collapse. That 200% spike in oil is what tipped the economy over into recession, which was then magnified in the fall of `08 as the financial bubble and debt markets imploded.

I think it’s safe to say that Bernanke doesn’t understand his role in causing the recession of 08/09 as he is now making the same mistake again. I think he believes the recession was solely triggered by the financial meltdown. That was the icing on the cake, but not the initial trigger that caused the recession.

Despite the complete inability of QE to heal the economy or job market, and since he really has no other tool, Bernanke just keeps doing the same thing over and over expecting a different result, but never getting it.

Commodities are the check that prevents Keynesian economic policies from healing the global economy. Keynesian academics either don’t understand this, or refuse to acknowledge it. Until they do, or we install Austrian economic advisers in the government, we are destined to continue making the same mistakes over and over.

So we will watch the price of oil as it rises out of its three year cycle low. If it hits $160 by next summer that will probably be enough to start the economy on the next downward spiral. If politicians get involved (and I’m sure they will) and try to impose price controls, they will multiply the damage and probably guarantee that the next economic downturn escalates into a truly catastrophic depression.

Until we see the spike in oil and the corresponding damage to the economy, no one has any business try to short anything, well maybe bonds, but even that will be risky because the Fed is going to be actively trying to prop the bond market up and keep interest rates artificially low.

All in all there is going to be so much money to be made on the long side, especially in precious metals, that no one needs to fool around with puny little gains on the short side, especially in a market that is going to be hell to trade from the short side. The time to sell short will be in 2014 after the dollar’s next three year cycle low. The dollar’s rally out of that bottom will correspond with the next global economic collapse, ultimately caused by the decisions made by the ECB and the Fed this past week. I dare say if they could see the damage their decisions are going to inflict upon the world and the dire unintended consequences, maybe they would finally stop kicking the can down the road and let the economy heal naturally. Of course that would entail several years of severe pain and politicians, as we all know, are extremely allergic to that.

2014-2015 is when we are going to see the stock market drop 60-75% and the next great leg down in this secular bear market. But until then there’s probably a pretty good chance we are going to see the S&P at new all time-highs in the next 6 months – 12 months.

The SMT premium newsletter is a daily and weekend market report covering the stock market, commodities, and the precious metals markets.

    Toby Connor
    Gold Scents  

    GoldScents is a financial blog focused on the analysis of the stock market and the secular gold bull market.   Subscriptions to the premium service includes a daily and weekend market update emailed to subscribers.  If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions,email Toby.

    © 2012 Copyright Toby Connor - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules