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
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

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

Crude Oil Prices and the Fiscal Cliff

Commodities / Crude Oil Dec 30, 2012 - 05:36 AM GMT

By: Money_Morning

Commodities

Dr. Kent Moors writes: You have heard all the stories of what will happen when the U.S. economy falls over the fiscal cliff.

As I write this, it appears that will happen--at least on paper.


Of course, it will take some time for the tax increases to kick in, while the automatic spending cuts may take a month or longer.

That may make it easier for some Members of Congress to act. Since the taxes will have technically increased, it will be easier for them to vote for an artificial tax cut.

I consider this the pinnacle of absurdity.

Subjecting most Americans to this charade-making them vulnerable to cuts in paychecks, dividends, and social security benefits merely to make some political brownie points-is the height of travesty.

But here we are.

Even if there is a this weekend or Monday, nobody will know what that means for several weeks. This will drag the drama on for a while longer as the precocious children inside the Beltway refuse to play on the same ball field.

Now we all know how this will end. There will be a stopgap measure rather quickly (probably around the time most receive that first paycheck of the New Year) to prolong the process into the first quarter - right into yet another showdown on increasing the debt ceiling.

Isn't there anybody else out there as sick of this as I am?

But in the end, we are interested in what the shenanigans mean for the energy sector.

Oddly enough, gas and oil prices have acted as if the cliff were an ant hill.

Oil Prices Trade on Market Forces, Not Hysteria
Strangely enough, the price of crude oil has been rising over the past week to prices higher than at any point since mid-October. Natural gas prices have been declining, with a reversal now expected with the first major series of winter storms pummeling the East Coast.

Both have been reacting to market forces, not to political hype.

Company shares in the energy sector, on the other hand, have exhibited a different reaction. While the sector as a whole remains rather stable, the pressing concern centers on anticipated demand levels should a deal not materialize.

And that is the most direct way this escalating political travesty will play out. The causal chain is rather simple, at least among the simple minds on TV spinning the yarn: fiscal cliff → increased taxes and lower expenditures → recession → lower demand for energy → declines in the value of energy shares.

Now there will be no evidence of this for at least a quarter after the tax increases and spending cuts kick in. But the market, according to this scenario, will begin reacting before then.

And the losses will mount until the market finds a new equilibrium. Where that level is (i.e., how far the decline is) will depend on how long it takes before our elected officials stop posturing for the cameras and get down to business.

Time to End the Blame Game
I certainly know whom I hold responsible for 80% of this mess. But let's also get this much straight. Spending time deciding who should take the blame will help here as much as it did on the bridge of the Titanic.

But we do have one thing in our favor. We are just about as far away from the next election as possible. That makes compromise (that essential ingredient for a democracy) a little easier.

We have already witnessed some retreat in stock values, but the prevailing approach remains the assumption that a partial "putting the thumb in the dike" will transpire before the axe hits. This has also been the case with energy shares.

That I am sitting and writing this as the sun goes down over a beach here in the Bahamas, I suppose makes it a little easier to take. But as you read this, I will be paying close to $7 a gallon for "petrol," prodding me back to reality. That and remembering to drive on the wrong side of the road.

We will know whether a deal is in the works early next week. If it is, it will still take us into 2014 to iron out an approach. There is no advantage for either political party to prolong this into the next Congress, although the actual voting on whatever package is decided upon will certainly take place there.

Either way, investors require strategies on which energy stocks to buy, which ones to ride out, and which ones to dump as this standoff in Washington drags on.

I will begin to explain how that is done here in Money Morning startingnext week.

Because in all the furor over the fiscal cliff and the political flack surrounding it, one very basic truth has been lost.

In the energy sector at least, there is money to be made whether there is a cliff to jump off or not.

Source :http://moneymorning.com/2012/12/29/where-oil-prices-are-headed-in-the-face-of-the-fiscal-cliff/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 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