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January 14, 2016

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OIL,OIL Let me remind all: I have been reminding everyone who would listen for most of my adult life:

1. There is more oil on the earth than any liquid except water. It is only how deep one has to go to get it.

2. The ultimate price of oil is determined by the world's low cost producer. It turns out to be the Saudi's at around $10 per barrel.

So, the world's analysts should stop guessing where the bottom is for oil. It is where ever above $10 the Saudi's want it to be.

Some things I would consider:

1. Iran and the Saudi's are enemies. The US and Saudi's are long time allies. It is highly unlikely that the Saudi's are hell bent on destroying the US and world economy. It is very likely that the Saudi's are trying to offset the new financial windfall of Iran as a result of sanctions being lifted and their 30-40 million stored barrels coming on line. As well as their production.

2. Ironically, for the world, or not, the Saudi's are not only the low cost producer they have the finest quality oil. That makes it hard to compete with their oil. Advantage Saudi's.

3. The fracking industry attack is likely a side show to be debated. My guess is that the destruction of the industry that Obama loves to hate is simply a result of Saudi's attack on Iran and their buddy Russia with their pricing war. In some ways Obama has to love it and hate it. Hate it because it is an industry of fossil fuel that he wants to eliminate. Love it because had this industry not evolved during the early years of his Presidency we would still be mired in a 0 growth economy. This industry single handedly improved economic conditions in 25 states and drove the economy to 2.5% at the peak. Now, with full oil war going on, with all the storage facilities full and with the world struggling to offset the fall of commodities the US economy shakes as the effects of a struggling oil industry ripples through the rest of our industries. Obama's legacy of economic salvation is on the brink of reversal. Hillary's shot is waning in a pool of oil.

4. Kerry moves closer to Iran to get the deals the President wants. A nuclear solution. Prisoner release. Economic ties to Iran in an effort to un radicalize them. Nixon made it work with China--sort of. Now Kerry/Obama will try it with Iran and Cuba. Cuba doesn't matter. Iran might. Meanwhile the Saudi's appear not to be willing to take the chance.

OIL is not the only canary in the Chinese mine. Copper was long ago trying to signal the change in China's strategy of grabbing the world's commodities and prebuilding their infrastructure. Now the rest of the world can buy concrete and steel at lower prices and rebuild their infrastructure if only politicians would see the opportunity. If only Bernanke would have printed $500B and invested it in US roads, ports, electric grid and bridges instead of US securities. Or our Democratic leaders could have actually done that instead of funding food stamps and unemployment benefits. Where or where are the leaders we need? Who is the next Lincoln?

TRYING TO OUT LEFT THE LEFT may not be a winning strategy in the environment of no wage growth, temporary jobs, international high alerts for weekly terror attacks and a Russia reminding us they were our ally when the President took office and now seem to have become Assad and Iran's best friend. Perhaps Hillary should try turning right like Bill did. Oh and then there are the economic numbers and the market.

REPUBLICANS: Watching the debates last night I am astonished at our focus on bashing each other. At the media's ability to turn the focus on GUNS and who said what about the other guy. IT's THE ECONOMY STUPID!! IT's REAL JOBS. IT's CORPORATE TAX REFORM. Get the focus where you might win.

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