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That’s my conclusion based on all the reporting I’ve seen about the production-freeze meeting there.
Oil ministers from 16 separate OPEC and non-OPEC nations got together at a Sheraton hotel in the Qatari city to discuss locking in January’s near-record production level.
The talks followed months of media leaks suggesting the Russians, Saudis and other Middle Eastern and South American producers were on the verge of signing a draft agreement.
But in the end, Iran effectively scuttled the deal. The country didn’t attend the gathering and made clear that it would continue to boost production back toward pre-sanctions levels.
Saudi Arabia insisted that it wouldn’t roll back output without Iran’s participation. And that was that – the talks collapsed after going on several hours past their expected conclusion.
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| OPEC and other oil-producing nations are is still struggling to agree on production cuts. |
Crude oil initially plunged on the news, falling more than 6 percent in early trading. But then oil started rallying off the lows, in part because a large oil-worker strike in Kuwait is cutting output in that country by more than half. That helped support energy stocks and the broader market, with the averages ultimately shrugging off the Doha debacle.
Me? I continue to see a split market. This late in the credit cycle, you simply don’t want to be taking too many risks with lousy companies in vulnerable sectors that sport ugly Weiss Ratings. Instead, as this Wall Street Journal story notes, some of the biggest winners out there are reliable, Steady Eddie, safe-yielders that don’t have extreme economic sensitivity. That’s where I continue to see opportunity.
[Read More – The Consequences of Reckless Lending – Mike Larson]
Want to know more, including specifics on exactly what to buy and sell? Then a great place to start is my just-released, hard-hitting documentary “The Unseen Hand.” It’s available online for a limited time here, and I believe it provides you with crucial guidance in these increasingly uncertain times.
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My beliefs about what’s next for the markets and the economy can be found in the video. But you definitely have some strong opinions of your own, based on the comments you posted over the past couple of days.
Reader J.P.F. shared this take on the interaction between governments and markets: “When the ‘invisible hand’ stops playing with the government’s tinkering hand, and allows market interest rates to rise to assume their proper levels, according to risk …. we will all breathe easier.
“Yes, surely some weak hands will be forced into bankruptcy, and either reorganize, or be liquidated. Such is the price for a freer market. As we all know, they are never ‘free’ as tax policies vary, tariff policies vary, and currency values float daily.”
Reader Bonnie E. added this observation on stocks: “I have an online trading account. I recently stopped by my e-broker’s local office. Usually, they are like a ghost town! But this time, there were several other people/customers in the office. Everyone was adding money to their accounts. The lady in front of me, when it came her turn, told the representative that she was there ‘to fund her future.’
“I thought ‘Yep, they’re buying into the ‘smooth sailing ahead’ line that’s being touted by all the talking heads on TV. Must be time to sell!”
When it comes to the underlying economy, Reader Anthony G. said: “The mal-investment economy is now exposed. The real economy is a complete con game. The global decline is a welcome relief from inflated prices.”
And Reader Chuck B. said: “We all know that the cost of actually living (food, clothing, fuel, utilities, housing, etc.), continues to rise, much faster than earnings do. That means there is less available for other things like travel, entertainment, luxuries and such (unless we can borrow it).
“Those are the things by which prosperity is measured, and our economy is NOT growing much. It could even be starting to shrink, as people are more conscious of costs, and are trying to save a little here and there for the future. They know that there is no longer any certainty about jobs and income, and government benefits are not as certain as they were. People are more on their own now.”
Finally, when it comes to the recent China “recovery,” Reader Walter S. offered this take: “We all look at China and believe the official growth figures of 6.8% or 6.5% or whatever. The truth of the matter is that when you have the government that China does, growth figures are a ‘command performance’ number, which is far from the truth.
“I have a business that manufactures in China, and therefore I have firsthand experience of Chinese factories. I can tell you that, at least in the electronics/appliance industry, most of the factories that I have visited within the past six months are running around 30% of capacity. That is down from over 100% a few years ago. So, you can draw your own conclusions.”
I appreciate all the remarks, especially the “on the ground” observations about China, brokerage firm customer behavior, and more. My belief is that we’re at the tail end of this expansion, which wasn’t much of a recovery anyway on Main Street.
[Read More – Yet ANOTHER Billionaire Warns About Coming Chaos – Mike Larson]
I lay out my primary reasons for that forecast in my brand new documentary, “The Unseen Hand.” Please do take some time to watch it if you want to know where I stand on the markets here, and how to profit in 2016 and beyond.
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The list of credit-cycle casualties continues to grow by the day. Another five firms defaulted on their debts worldwide last week, pushing year-to-date defaults to more than $50 billion. That makes this the worst year for corporate debt performance since the Great Recession of 2009.
Brazil’s President Dilma Rousseff lost the support of Brazil’s lower house of congress, which voted 367-137 to impeach her. The Senate will now decide whether to vote to kick her out of office. The economy is mired in a brutal recession, a wide-ranging government bribery scandal, and more.
The more policymakers try to fix past problems, the more they create new ones. Case in point: China is trying to make credit easier and money cheaper to keep its economic slump from deepening. But while that helped boost growth in March, it also has helped re-inflate massive bubbles in big-city housing markets.
The Financial Times reports that home prices surged as much as 63% in Shenzhen and 30% in Shanghai from a year earlier last month. Mortgage borrowers jumped 60% in the first quarter, according to one estimate.
So regulators are responding with new home-buying regulations – essentially, trying to fix the new bubble that was created by their efforts to fix the bursting of the last bubble. You have to love this new era of activist policymaking, eh?
Now, it’s your turn to weigh in. What do you think about the political turmoil in Brazil, and its implications for emerging market investments? How about China’s latest bubble du jour? Are you concerned about spreading bond defaults like I am? Share your opinions in the comment section.
Until next time,
Mike Larson
P.S. There is still time to save your wealth and profit! The information in this news special, “The Unseen Hand,” is cutting edge; ripped from today’s headlines. We cannot leave it online past this week and it may go offline at any time without notice.
Hurry — Click this link to view the 30-minute video!
Recommended Articles by Mike Larson:
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Why is Obama rushing off to Saudi Arabia, shortly? Because Congress is working on a bill, with bipartisan support, to allow American Courts to hold the Saudi government liable if it is shown that they are responsible in any way for the 9/11 attacks. That could tie up huge Saudi investments in Treasuries and other American assets for years. They have told Obama, that they will immediately dump some $750 Billion of such assets if the bill passes. What do you think would be the effect on markets for such assets if they carry through? it wouldn’t be pretty, and could come as markets are beginning to fall anyway, from the effects of high debt, declining earnings, consumer spending, and such.
I’d think if Saudi Arabia dumped American assets (a) the price of those assets would tank, and (b) the interest rates on Treasuries would have to increase – since America MUST sell to finance the deficit spending.
Both situations indicate “sell now”, and “buy later” – during the slump.
Beyond that, the economies of the world will react in whatever way human psychology drives them. The situation is already past the point where I can explain it any other way.
Unsuccessful attempts to fix the market price of oil are reflective that is simply not possible to fix prices of a commodity that is fungible and has many suppliers. The human desire to cheat is just too strong.
so it’s the market that sets the price? not the saudis, frackers or anyone else? imagine that?
Can anyone explain why there were two expedited Fed meeting sandwiched around a Yellen/Obama/Biden meeting last week? Something must be very wrong in the banking system either in the U.S. or on the global stage.
I can give you a hint: China is preparing to flood the world market with a new yuan, backed by gold. The catch is, you won’t be able to purchase it with US dollars. They have announced they are doing this tomorrow.
Yes, David; I hear china will set a definite yuan/gold price, which will make their currency the only gold backed currency in the world. Maybe that had something to do with the meetings peter mentioned. I’ve heard that if the U.S. wanted to do the same thing, with the amount of digital currency(debt) in circulation, an ounce of gold could cost tens of thousands of dollars, instead of the $35 it cost in 1971. Inflation, anyone?
That’s if we really do have the 8000 odd tonnes of gold the government claims we do.
I can give you another hint regarding all these meetings: Obama does not want the Fed to raise rates again before the elections. Not on his watch; simple as that. Goodness me, the DNC just needs to kick that pile of rusty cans down the road a bit longer. Please also note the presence of Biden, who will end up as the Presidential nominee of the DNC. You can put that into your pipe, and smoke it.
ON MONDAY AND TUESDAY LAST WEEK THE FED RESERVE HELD TWO SECRETIVE MEETINGS,AND ON WEDNESDAY JANET YELLEN WAS SUMMONED TO THE WHITE HOUSE..THE REASON MAY BE BECAUSE JP MORGAN,BANK OF AMERICA,WELLS FARGO AND BANK OF NEW YORK MELLON FAILED THE LATEST LIVING WILLS/FINANCIAL STRESS TESTS.
should i sell the rally, mike? all the metrics you talked about are still negative, some even getting worse. how come the market isn’t going down?
I have often thought that the Chinese should offer Americans low cost credit cards.
Say 5% interest. We could then borrow from them, pay off our own predatory debt
and begin to buy Chinese, and American, goods again. Why aren’t credit cards globalized
in the sense that we can borrow from foreign credit companies? Or are they and we just
don’t know about it.
you can. it’s called a carry trade. boris and kathy do it all the time. good luck with that.
Our government has been feeding the public inaccurate/misleading numbers on inflation, unemployment and GDP growth for many years. Why is it that the pundits are only concerned with the legitimacy (or lack thereof) of China’s numbers as opposed to our own?
you remind me of larry, craig. you sound just like him.
It is all a function of degree. Yes, the US numbers are wacky, since the definitions (like unemployment and other vital statistics) are wacky. In China the numbers are “made-up” and their methodology is a mythical calculation which nobody knows how it is really done and nobody will ever really find out. Pick your poison.
I think the Brazilians should stick to doing the the Bossa Nova well, and keep entertaining the tourists with liquor and bare-breasted women. Those seem to be the only things they really get the hang of. Government, public debt and the Olympics all seem to beyond their grasp.
Everywhere I look, I see populist governments that have been supported by single or narrow commodity markets. Venezuela, Brazil, Russia. Diverse economies are difficult to build, take time and pay strong dividends in terms of resilience and stable leadership practices. We’ll see this played out over and over again as in past. This will continue to create risk and opportunity.
I actually hate to type this, but it sure feels like what is next. Next up will be massive money printing action by the Fed.. The reality of the situation that we are in with nearly 20 Trillion in federal debt, and there is no clear, or rational way of paying it off. So, we’re either going to see a massive specific devaluation of the US Dollar, more money printing as previously noted, a move to a world or geographic monetary system, or a serious outbreak of war.
I’m gonna go with massive money printing for now. Obama wants to kick these problems down the road to the next POTUS. So, as bad as my choice for what happens next is, we’d better pray that this is what happens because all of the other possibilities are far worse.
Sorry,
Mike C.
Mike…..I think you are right. Obama has borrowed $10 Trillion under favorable conditions – conditions that could be about to run out. When borrowing is no longer possible…..the presses will have to start printing dollars big time.
Of the other items you mention….war seems most likely. When financial conditions go bad….wars increase because social mood declines.
Hi 151.10 trillion, whats a few trill more and the good thing is he dont have to deal with the fallout,just blame it on the next sucker.Honestly,who would want to be the next President,it would have to be the village idiot
Anyone who looks at our history and how we began as a country would see a people motivated by the challenges of life, liberty and the pursuit of happiness. We had courage back then to take on the world with hard work, a youthful innocence and an acceptance that to get some where we had to work for it. We have lived through prosperous times and look where we are now. Ten trillion dollars more debt in almost eight years. When will our children ever pay this back?
However, kicking the can down the road just makes both the pile of cans and the rust holes in them bigger.
As I understand it, the meeting in Doha was supposed to be about the psychological impact on the price of oil. I reality, the whole notion of putting a cap on production at near-full production levels is absurd!! But then they couldn’t even pull that off!!!
…..and then, with a little more “whatever it takes” language issued by some fed official, following Draghi’s lead, our markets just shrug off any negatives, and keep on going up!!??
our markets just shrug off any negatives, and keep on going up!!??
Never underestimate the power of the presses.
Good on you Bonnie and Mike for understanding this. But the chip sellers still want you at the slot machine.
The market shrugged off this news because it is in the last days of a 5th wave. We might get the S&P 500 to 2100 + or – a few….but that should be about it for this rally.
Interesting you say S&P500 to 2100+/-. That would be within a few points of a downtrend line drawn from last May’s peak through the Nov. peak. After the big run-up, we seem overdue for an equally big fall – or worse. Of course, we could go to 2130 odd, and form a double top.
You can blow a lot of hot air into a wad of bubblegum before it finally bursts and gets that nasty pink stuff all over your face. Looks to me like that sucker is getting pretty large.
I have a slightly different take on the oil meeting. In that U.S. producers have the most to lose, it was the Saudi’s way of telling The United States of America and their new pals the Iranians to kiss their behind. Jim
Yes Jim. That makes the most sense.
Maybe, also, a little warning shot to Congresspersons from oil states, concerning that Saudi liability bill I mentioned above.
Definitely, Chuck! Jim
Hopefully market takes a dive shortly. Looking forward to another opportunity to add on the cheap. We saw the shake out last quarter, many screaming run for the hills. Im inclined to think a profit is a profit and as long as it is profit why the long faces? Oil holding on based on current levels, some eager to front the ministry meeting not thinking that freezing is not cutting, maybe bringing a drawdown sooner than later only the production remains steady so does supply, resreve and consumption. Why would the kingdom bow now that theyve got the U.S. prpducers over a barrel? Have to believe Putin not the type to take this lightly, Iran or the not. Great time to build position. The whole F·n world want the Saudi to slow…. Expect Obama on his way to thanking the minister for putting noose around his neck on behalf if the U.S. and Iran sanctions? Proof in the “Pudin”
Oil not going anywhere no one in panic mode. Sucker!
Yes, this cycle is now very long in the tooth and stocks could swoon when the elites and their investor managers sell in May and go away to play on their yachts in the nice summer weather. Meanwhile, the people swarming into the discount brokerage could just be depositing tax refunds. It is that time of year. Of course, the wiser thing to do is hold that money until October, an historically better time to invest. These same people could be back in the office in October, wanting to take their money out. Unless they buy and hold and enjoy the ambience of life in spite of the mood swings on Wall Street. .
Dan, agreed……However, it seems that the month of the year theory (ie. buy in Oct; sell in May, etc…) is not holding true now….. Look at what happened this past Oct., 2015.
In addition, I’ve noticed lately that gold is beginning to track along with the market (djia) That’s the opposite of what has been happening in the recent past.
I think ALL of it is getting ready to…………actually do what NOBODY expects!!! ……just for the fun of causing as much pain as possible to those who are in it!!
Just one more reason why that Iran deal was a disaster and the sanctions should never have been lifted.Iran will take a negative position on ANYTHING just to create problems.And of course now the Saudis will just jump on the bandwagon to exploit our newfound friendship.
In a ‘Jerry Sceinfeld’ comedy skit, Cramer was quoted as telling Jerry, “Don’t believe the
hype”. For a totally crazy character, Cramer had his moments. How many investors have
a good hype meter? ‘Buy on the rumor – – sell on the fact. Works for me!
Seems to me that the big game going on right now is Musical Chairs. Just do not get left standing when the music stops.
This morning, I read that housing starts are falling – down 8.8%. Would starts be falling if sales are doing as well as reported earlier? That seems doubtful. This can’t be good news for companies that supply wood products, HVAC gear, roofing material, etc. – or workers in construction related fields. Also, I notice that, locally, while there is a good bit of activity in apartment construction and conversion of downtown office buildings to apartments, there don’t seem to be that many housing developments going up – and some of those are not selling well. Millennials, who are the natural market by age, seem less interested in going into debt to own houses. They are often heavily indebted already, for their educations, I suppose.
Another little unseen hand, I guess.
Just saw an interesting chart. Money velocity is down over a third from the late ’90s. If Americans aren’t spending their cash, they must be trying to save it. Like the Japanese are said to be doing despite negative interest rates. So much for the Fed’s goal of getting people to spend their dough. The lower they make the interest rate, the more it seems we want to hold on to what we have, in contrast to the theory the Fed is laboring under. Maybe they should try higher rates.
Mike Larsen got it wrong..again..he’s been banging-on about us being in a bear-market for months..but all we ever got was a brief rate-rise tantrum correction..I guess he’ll just blame an ‘Unseen Hand’ & keep beating his drum until a market plunge arrives again (someday) & tell everyone how ‘right’ he was. How does somebody hold-down a job this long..despite always being wrong about his hysterical warnings & predictions..like when he yelled at us to buy energy-stocks while oil was approx $100 barrel..Then told us how dire the energy-sector was when oil dropped below $30 barrel..as if he’d never made his totally-wrong calls..