If Oil Drops to $40 - Things Will Get TERRIFYING!
He’s not the only one who thinks lower oil prices mean trouble.
Question: The crash in the oil market is already causing jitters in the financial markets around the globe. What is your take on that?
Gundlach: Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying.
What would that mean for stocks?
There Will Be No Rebound in Oil Prices
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Self-evidently, we are now in the cliff-diving phase, but unlike the bounce after the September 2008 financial crisis, there will be no rebound this time around. |
Most of the world is at “peak debt”. That is, the ratio of total credit market debt to current national income ranges between 350% and 500% in every major economy;
and that is the limit of what can be serviced even at today’s aberrantly low interest rates.
Just as T.Boone Pickens warned, watching the US Rig Count is key to comprehending the looming crisis in oil. The last 4 weeks alone have seen a drop of over 100 rigs – the 2nd fastest slide since 2001 in percentage terms. This is the worst December to January since 2008/9. As Pickens noted, “demand is down” – “lower demand is the main driver” - “rig count is gonna fall – drop 500 rigs in next 6-9 months”.
Nearly certainly in real terms, and possibly nominal terms as well – unless/until the Central banks inevitably resort to hyperinflation to “repay” their debts; which sadly, has been the route taken in every fiat regime throughout history.
Thus, particularly given my ten years of experience as a Wall Street energy analyst, I am incredulous when I hear people speak of the “temporary” nature of the oil/commodity price decline; such as, for instance, Janet Yellen, who earlier this month described it as “transitory” – although clearly, she was lying through her teeth.
No, the multi-million barrel/day difference between supply and demand will decidedly NOT “correct” itself; particularly as demand continues to plunge, and supply to surge. You see, unlike in 2008, Central banks cannot inflate the money supply without causing hyperinflation, and manufacturing capacity is dramatically larger, financed predominantly with high-yield debt from an insolvent banking system.
Saudi Arabia itself just announced a record trade deficit; and given that it, and most OPEC producers, are socialized nations relying on $100 oil to fund spending programs, there is essentially no chance they will cut production; as not only do they desperately need the revenues, but are low-cost producers; and thus, know they can destroy high-cost producers, such as the U.S. shale industry. And sadly, this argument is not limited strictly to oil, but countless other resource-exploiting industries.
Except, of course, gold and silver – which are not only the polar opposite of “commodities” (given their maximum utility during times of financial crisis), but have been “treated to” the polar opposite supply effect of other commodities.
In other words, just as the Central banks funneled endless amounts of printed money into the production of industrial commodities,
their unrelenting suppression of gold, silver, and mining shares has created an essentially guaranteed production collapse; again, which could take decades to resolve,
with the double whammy of occurring amidst historic demand.
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Freaking banksters, I deplore them.
The tactic of causing conditions that threaten to interrupt world oil supply has been successful in
increasing the price of oil from less than $20.00/barrel at the end of 2001 to over $140.00/barrel by the middle of 2008.
OPEC could never get Oil over 20.00/Barrel till Bush/Scherf was in Office..bring the Price down to 0..stop all Legal ( 1 trillion a year business now ) and illegal drugs ( burn the poppy fields in Afghanistan ) boot all Fiat Currencies Worldwide
Let’s all applaud the inside information of oil prices falling from $120 per barrel to $49 that we received from Lind$ey William$ and his “Elite” friends in the Oil business before it happened…NOT !!
Pa$ture Lind$ey William$, mouthpiece for the Elite..!..
@ Boxed in Frieght
Brent dropped below $49 a barrel today
everything comes out of the ground for free
why pay for anything
That may be true if you owned the land, you brought up the oil, and you refined the crude in your little backyard refinery. If you can do all this, it’s free.
Scare tactics to try and still get people to invest in gold… I’ve come to the conclusion that while there is some interesting articles on this site, most of ya’ll do nothing but try to scare people into joining your “facebook replacement” or to buy gold….Oil below 40 will slow down the drilling, but it won’t be a repeat of 08/09.
I’m shaking in my boots at the thought of getting cheaper petrol….no….no….please no!!!!
Yay for looking at the small-picture!
When the dollar, or any other currency, is not backed by anything then there is a problem waiting to explode. Right now people whose investment portfolios are leveraged… They invested 100 to buy 1000 worth of shares… Are in a position to be totally wiped out. Back in the 80s I was urged to keep refinancing my home, pulling the equity out in order to buy shares on margin. Today I am not the richest person on my street, but I am fairly comfortable. We’ve seen balloons pop before nd watched people go from riches to rags in an instant. It really boils down to one of two things: either greed or ignorance, but likely a combination of the two. Who doesn’t want to have more money? Everyone does. But far too many of us have trusted what the banks and investor counsellors have told us, and believe the government.
The investment people have one purpose and that is to make money. They are not going to tell you to invest in gold or silver then dig a hole and hide it. No, they are going to tell you to invest, invest and invest. Borrow to invest, because even when a recession rolls around and the value drops, it will always come back up. Just ask the folks who put their life savings in Enron.
The government tells us the economy is getting better. Near zero interest rates, unemployment going down. It is all rosy.
But they do not tell you that they do not count people who haven’t worked in a long time as unemployed. They don’t tell you the real US. Unemployment rate is closer to 25%. They tell you black youth are frustrated because they can’t find work, and the only effective way for them to survive is to sell drugs, commit crimes and just get off the radar as best possible. They have a beef. Many people have legitimate gripes because of government lying. But there are as many white Wall Street thieves as there are black criminals in Chicago.
I am a white 60+ year old sort of conservative. But I am completly disallusioned with conservative politicians. Boener, Speaker of the House, has a lot of investments in companies benefiting from Obamacare. I am all in favor of universal health coverage. But I don’t understand why a simpler plan could not have been made. Well, it could have actually. The structure was in place. It
was called Medicare. And with some alterations it could have done a lot of things… Covered people who could not afford private health care and expanded our 1st class medical system to cover everyone.
Australia enacted a plan to cover all legal residents. And those who can afford it buy private health insurance that expands their choices of doctors and hospitals. Everyone who works pays about 5% of their gross pay for Medicare coverage. As a part of student loans new doctors are required to practice in the government system for so many years. Doctors immigrating to Australia have to go to school to make sure their qualifications are up to Aussies standards, and they are required to work in the government system for a period of time. And standards are high. It is seldom you read about malpractice suits.
The US should have looked at other than Britains system.
Politics. Dishonest bankers. Dishonest politicians. Sweep them all out, set term limits on all of the, including beaurocrats and maybe something positive would happen. Otherwise it will become a war of black vs white vs Hispanic vs Islamics and all vs law enforcement.
I couldn’t agree with you more….
Then why aren’t you living in Russia?
It is the most fundamental of American rights that I state my opinions, beliefs and wishes for this country even if it makes you angry.
Just as it is your right to do so……
If you wish to keep me or any one else in this country from participating in that right…..why aren’t YOU living in Russia?
@ Pink Slime
Perhaps you are under the illusion that you are not living in the USSA, Russia by comparison is a rich country where a few banksters now live in jail, the USSA is a country filled poor people living in a dream world of get rich quick which for the majority never happens, getting poor or dead quick is however very easy unless you are on the Political Payroll – a party member.
The worlds elite 1% do not live in America or keep citizenship there simply because of the income tax problem, there are moral exceptions such as Steve Wozniak and for some reason this seems to be true only for the self made who have every intention of giving wealth away.
@DK
I’m so glad to hear this news about Russia. Maybe it will encourage Pink Slime to move.
We already had universal care. The negro wanted US to cover for Moslems and illegal immigrants and give “Cadillac” care to other Negroes.
Well Put. Try to stand strong. Media saying the (right) things to really stir us up this morning. Stay close to freinds and family. CLOSER and INFORMED and Get ready Sh*S about to hit the fan. Lets get this over bring it on. We in the country are ready for the influx of nut jobs that will be fleeing the cities. The war has started. We have already been split.
$40 a barrel? THATS A GOOD THING!
15 is better
“…the crucial role of the international oil exchanges in London and New York is crucial to the game. Nymex in New York and the ICE Futures in London today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil—West Texas Intermediate and North Sea Brent.”
http://www.globalresearch.ca/perhaps-60-of-today-s-oil-price-is-pure-speculation/8878
this looks like a sales pitch, OH NO THE SKY IS FALLING, buy this gold here! lol
Low oil prices have always been a boom to economies. Consumers will have more money to purchase non essentials . Drivers will travel more, fertilizers and pesticides prices will fall increasing farm production and lowering food prices. Building supplies ,plastics , chemicals commercial transport, airlines, utilities will all benefit. what’s not to like. Oh you want me to feel sorry for the giant oil companies, the greedy water and air polluting frackers or the House of Saud, I will have to decline, bring on $40 oil.
that sounds horrible! this is the end times!
these are all phoney markets
to print more worthless paper money so the rich can get richer
let this fake economy crash it was hocus pocus in he first place
we only need love food and water
which you won’t be able to buy with money gold etc. anymore
the ping pong ball is coming back
Since when has cheaper energy been a disaster? You don’t want to drink too much of the Kool Aid, they mean a disaster for the corrupt a$$hat’s who have been robbing you blind.
2015 oil prices won’t change US dominance in the world marketplaces. What’s the larger story behind the 2015 oil prices? OPEC will have to compete for the markets that used to be theirs for the taking! This is also going to push people into using new electronic technologies for a variety of purposes. Oh, you don’t think so? Well, have you read anything about the “Pay-Per-Mile-Tax” now being instituted in pilot projects in the states of California, Washington, and Oregon? How are they going to know how many miles you drive? Electronic tracking systems, some already installed in all kinds of vehicles, will be used to track how many miles you drive. Not only that, the amount of the tax you pay will be determined based on what type of vehicle you drive. Don’t get excited about this though, because those of you who drive fuel efficient “hybrid” vehicles, or electric vehicles, will be paying up to $100/year more to register your vehicle. The proposed taxes based on the miles you drive and what type of vehicle you drive will increase the cost of driving any type of vehicle as much as 100% to 150% per year! Have a nice day.
All of this is directly related to Tech Stocks, especially Microsoft Stock, which is forecast to keep climbing in price in 2015. While all of you point fingers at O, the person to watch is B. Gates! Look, look at me Ma, I’m King of the World!
Cry me a river. Poor Poor oil producers have been sucking us dry for decades making record profits. I am just glad to see affordable gas at the prices gas should have been all along.
BIN readers were scared when oil was $140 a barrel. Now they are scared that is headed towards $40 a barrel. See what FEEEEEER POOOOOORN© does to you? The only difference is that BIN readers blamed Obama for the high cost of oil when he didn’t have a thing to do with it but they don’t give Obama credit for the low price, which he doesn’t have anything to do with either.
Some people are missing the point–cheap gasoline prices for the american masses =good
cheap oil prices for geo-politics and foreign diplomacy, failed foreign dictators, and a crumbling ruble=bad
Not just bad for them, but us too. As dictators always start wars as their regime collapses.
The issue with debt is that it’s an imaginary notion. There is no such thing as debt as the more in the “red” you are, the less you will actually owe.
The bankers invented Debt as it does not exist in the real world or in math.
The current debt in real terms is .000,000,000,000,18
This is 1/18th trillion of a dollar, not 18 trillion “magic” invisible dollars.
We owe less then 1 cent.
There is no such thing, as Magic Invisible Dollars. They are making this “term” up to create a system of prisoners to their insanity.
“what the hell is wrong with everyone” – steve jobs
“what the hell is wrong with everyone” – steve jobs
That’s what everyone was wondering ’bout you!
——————————————–
There is debt, and sure it is made up why that is why they get more “imaginary” with it (read increase) and that is why God came up with the “Jubilee” year to wipe out the man-made fairy tale!
But they have never done it SO GREAT SHALL BE THE CRASH THEREOF!
Folks stop and look at one thing. Diesel is still high; why; transportation costs for the delivery of good (trucks on the road). Diesel should be way down, one thing it takes less refining to make so why is it still up hum mm. If you don’t think this is not planned think again. The cards are stacked against us at every step.
It’s really very simple, if you want to get the price of oil up just elect another Bush into office, that will get the price of oil soaring through the roof (along with everything else), the only problem is the economy will tank just as the last Bush did.
Or……elect a republican majority congress.
will the price of cars come down a new car in the 70′t’s $1000 told need go up as the price out went up so will the price of cars and all come down ?
If oil drop below $40 a barrel, Confucious drive to Las Vegas for big weekend!
Oil dropping like this has meaning. Something will be affected by it and cause a “disruption” wave that will hit something and that something will hit something else and so on.
Beware the “domino” affect!
You can call it fiat currency, you can call it worthless paper, you can call it green toilet paper; The fact of the matter is that paper pays my bills…and the lower the gas prices the more i have to spend on the economy. Some think this is bad, but i guarantee you they don’t mind paying half now for gas than they were just 6 mos ago. I don’t hear anyone complaining about that!