re: trouble at mill: oil prices and housing
At the moment, the USD is up 30 cents to 86.12 and oil is down 37 cents to 70.00.
Wallstreet mentioned that Oil had gone down but the Saudis and other suppliers would have a lower currency and hence received more in their own currency.
The oil price is notoriously hard to to shift, because: 1. Vast tracts of oil fields and other concessions have been locked in by the Chinese and others are imitating this tactic. It will take years before a more or less proven oil field will be drilled after holes have been plugged.
So, this oil is out of circulation and it appears that the market does'nt appreciate that. Consequently, the pressure on the remaining oil world reserves has increased even if some substitutes (ethanol ) are being used.
Of course, combine this with geopolitical problems, the thread of dimishing stocks (US hurricane season starting up) and the usual terrorist moves, then all these parameters include a price for their individual risk factors which together are a tidy sum.
The chinese are not that stupid and may well have obtained cheap oil and some cheap resources in hindsight, particularly as inflation is moving up.
Add to that the unwillingness of the US to pull their finger out and rather increase their trading deficit by borrowing for obtaining this oil and one can appreciate their negative and grotesque thinking.
2. The US Housing sector. Chapman mentioned that share prices of the large US building properties have declined by 50% and I won't be surprised if they are going to get a hard time.
I did mention that Bern. had to make a painful choice and property seems to become the scape goat. According to Van Eeden, M3 has declined somewhat; give the set up another month and the true damage can be better assessed in a slowing economy with higher interest rates.
Suggestions were made that more credit will solve the situation but who wants to borrow? On expection of higher house prices? No.
Unless he comes up with a nefarious scheme costing hundreds of billions of dollars acting as give aways and be accused of giving preferential treatment, prices must come down by a good amount to enable buyers with lesser real income to buy these. Inventory levels of stock are rising.
And the flow-on negatives including a savings rate below zero have been discussed in this thread.
3. The US economy is like a massive sieve, full of holes, that one named as "housing" is one of the biggest.
Gerry Readers, please do your own research and you decide if and when to buy, hold or sell any stocks or metals/commodities.
