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Hah! A lot of so-called “experts” on Wall Street, trying to divine the next bottom for a barrel of oil, now say it will be $25, $20 or even as low as $15.
What’s ironic is that, among them, are some of the very same individuals who, near the peak of the oil market just 18 months ago, were telling you to expect ten times more — $150, $200 or even $250 per barrel.
I can understand how they might want to make mid-course corrections in their forecasts from time to time. But the unfortunate reality is that their voices seem to surge and sink with the same high-pitched volume and volatility as the market itself.
Ditto for their forecasts on commodities, China, emerging markets, the U.S. dollar and, most recently, the U.S. stock market. To be expected, I guess. But not exactly helpful for investors like you.
Wait a minute …
Do you think that I’m now going to follow up with a compliment for our own Weiss Research forecasters?
Do you suspect I’m going to use this opportunity to remind you how they predicted the oil market crash and its consequences with remarkable discipline and precision?
You’re darn right I am. For example …
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Before oil peaked in 2014, Weiss Research’s Larry Edelson mapped out exactly how oil prices would plunge to where they are today. So last year, I interviewed him extensively about his forecasts on all markets. (Click here for that transcript and here for the follow-up.)
Before nearly anyone was talking about a long-term surge in the U.S. dollar, Weiss Research’s new forecasting duo — Boris Schlossberg and Kathy Lien — were lone wolfs betting on that all-important megatrend. I interviewed them last week, and I found the experience enlightening. (Click here for that transcript.)
Similarly, before the recent rout in U.S. markets, Weiss Research’s Mike Larson warned repeatedly of the dangers — always offering proof after proof for die-hard disbelievers. Now, with those events unfolding just as he said they would, I’ve jumped on the occasion to undertake this third memorable interview …
Global Shock Waves
In last week’s interview, Boris and Kathy told you about the next major earthquake and why China was at the epicenter. Now, the first words from Mike take that forecast to the next level …
Mike Larson: The global shock waves are now spreading outward in clearly definable concentric circles.
Martin Weiss: Please name them and tell us what’s next for each …
Mike: Boris and Kathy nailed it. It starts with China’s slowdown, which is quickly morphing into a deflationary collapse for the world’s second largest economy.
Oil is the next concentric circle. Last Friday, even after a rally, it was down almost $80 per barrel from its 2014 peak.
Martin: Most investors are tired of hearing that.
Mike: Â Perhaps. But what they may not know is how broad and massive the impacts are bound to be, assuming …
Martin: … assuming oil continues to plunge?
Mike: No, assuming nothing about the future price of oil. Even if oil bottoms right here and now, massive consequences are already baked into the markets and economies of the world.
Martin: Sure. In the oil exploration and production sector, it seems investors already gave up months ago.
Mike: That’s an understatement. Last year, EPX, the index of oil companies plunged 42%, compared with a virtually flat S&P 500 Index.
Just recently, SandRidge Energy Inc., which was a once high-flying Oklahoma-based shale company, was delisted by the New York Stock Exchange. I think it was selling under 20 cents a share.
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Martin: Same for other kinds of energy.
Mike: Absolutely. Coal in the U.S., which was already a dying industry, has been absolutely decimated by the energy plunge. Shares in once-proud-and-famous coal mining giants like Peabody Energy and Arch Coal are now selling for pennies or dimes on the dollar — or going broke.
The natural gas sector is in ruins — LNG futures down 28%; major producers like Cheniere Energy and ConocoPhillips, down 58% and 38.7%, respectively.Â
Alternative energy — solar, wind, even nuclear — has been clobbered. Who in their right mind is going to invest in all the modern technology and infrastructure you need to get those going when old-fashioned fossil fuels are now so, SO much cheaper.
Martin: But the impacts aren’t limited to energy producers, are they?
Mike: Not by a long shot. The shock waves are also slamming into companies that specialize in storage and transportation. Look at railroads, for example — devastated because oil and coal cargos are down so dramatically. Ditto for trucking companies.
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Martin: I notice the Dow Transports just dropped to the lowest since the fall of 2013.
Mike: Exactly what I’m talking about.
Martin: You’ve also been warning about the pile up of debt in the oil world and the looming disaster in junk bonds.
Mike: $353 billion in debt as of December of last year. Just in oil exploration and production companies in the U.S. and Canada.
Martin: Right. And now the junk bonds have really been through the paper shredder.
Mike: Absolutely. One of the most reliable bellwethers of junk bonds — the ETF with the symbol JNK — is now down 32.7% from its 2007 peak, and apparently headed for a rendezvous with its panic low in the depth of the 2008-09 debt crisis.
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Martin: You used to be pretty much the only one warning about a disaster in the junk bond market.
Mike: For a while, yes. But not anymore. For example, Bill Costello, energy analyst at Westwood Holdings Group Inc. says this year is going to be much worse for companies with weak balance sheets. He sees restructuring on the way for smaller producers like Penn Virginia, Midstates Petroleum Co., Ultra Petroleum, GoodRich Petroleum and Resolute Energy.
I agree. They could go the way of Swift Energy, which stopped making some debt payments in December and then filed for Chapter 11 on the last day of the year. But I would take this conversation far beyond small companies. They’re just a sneak preview of much bigger dominos likely to fall in 2016.
Martin: And you’ve been warning that the debt mess is not going to be contained just to the energy patch. It’s also going to spread out from there. Is that happening?
Mike: Yes. I already mentioned transports. But the energy collapse is now also impacting the demand for steel used in oil and gas pipelines or for steel to build and maintain oil and gas wells.
Martin: Energy isn’t the only reason steel is collapsing, is it?
Mike: No. Steel is also collapsing because of the same reasons oil is falling — China, the plunge in other emerging markets, falling global demand.
And here’s the key: All these deflationary forces are feeding on each other. Not just in steel, but also in iron ore, tin, aluminum, copper and more … plus grains, meats and other markets.
Martin: Can we bring this back to energy stocks? Stick to the top names for now.
Mike: Sure. Look at Exxon Mobil, down 13.6% from its 2014 peak; Chevron, down 28.3%, and Hess off 59.3%. Do you realize Hess just traded down to the same level where it hit rock bottom back in 2009? Scary, eh?
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Martin: Only if you’re not prepared.
Mike: Agreed. Also look at the huge damage that’s been done to Halliburton, down 26.8% to $29.29 per share, Schlumberger (down 23.4% to $61.45 per share) or Chesapeake, down 82%, a possible candidate for bankruptcy.
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The End of Social Security? Congress and President Obama just took a potential $60,000 in Social Security benefits away from you … That’s like losing two months’ worth of checks every year for the next 20 years. But, there is a small sliver of hope … The law leaves a short window of time open for seniors to claim their money — or lose it forever. |
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What Next?
Martin: Mike, so far you’ve told us what’s happened. But the payoff for our readers is guidance on what’s going to happen next.
Mike: Whether oil prices bottom now, go lower or rally, what we’ve got here is plain as day. It’s global Deflation with a capital “D,” just like Larry said it would be before it all started.
Martin: Tell our readers exactly what that means to investors.
Mike: It means a dangerous cycle of declining commodity prices, disastrous corporate revenues, disappointing profits and, ultimately, a rash of debt defaults.
It means near-depression in energy producing countries (like Nigeria, Russia, Kazakhstan and even Saudi Arabia) … recession in giant commodity countries (Brazil, Canada, Australia) … and slumps in economies not typically associated with commodities (such as the United States, the European Union and where it all started, China).
Plus, as we discussed earlier, this isn’t just an energy story — or even a commodity story. More and more sectors of the stock market are weakening because the economic pain and credit market problems are spreading. That’s causing losses to mount in all kinds of sectors: autos, financials, media, real estate, technology, you name it!
Martin: But it doesn’t mean disappearing wealth-building opportunities.
Mike: Quite to the contrary. You can make great fortunes on the way down with ETFs or options that are explicitly designed for that purpose. And you can make even greater fortunes by buying into massive weakness. Even if you don’t pick the exact bottom, as long as you have plenty of cash on the sidelines, the more things go down, the more your cash is worth in terms of the number of shares it can buy.
You can also make fortunes in a giant healthy marketplace that trades instruments with no correlation to stocks and bonds — foreign currencies. In fact, deflation is great for currency investors because it helps drive the U.S. dollar on a smooth, steady ride straight into the stratosphere. And on the day the tides turn back to inflation, currency investors can anticipate an even bigger profit bonanza.Â
Martin: Thanks for ending on a very positive note.
Mike: Thank you, Martin.
P.S. TODAY IS THE DAY!
“The Ultimate Wealth-Building Tool for a World Gone Mad” premiers at 2:00 PM Eastern Today!
Kathy Lien and Boris Schlossberg — both CNBC regulars — have agreed to sit down with Mike Burnick to tell you the ultimate investment vehicle in times of stock market volatility and global turmoil.
In fact, this investment strategy actually BENEFITS from times like these.
No registration is required. Simply click this link a few minutes before 2:00 PM Eastern!
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
{ 39 comments }
good job. now, as my boss would say, do it again. this bottom is…
I need to know where the market is going, not a pat on your own back for telling me what has already happened. Everyone has 20-20 hindsight . If you make many predictions, some are bound to come true. Which ones should we believe and act on? What are your returns on an annual basis? So what is going to happen to the stock market, oil, etc? This article about making fortunes brings questions for me. I think you should just say you don’t know, rather than what this article claims.
Do you really think Exxon will suspend dividends or go belly up? And that the economy will come to a halt.
A “good world war” would solve a lot of things.
You say, “In fact, deflation is great for currency investors because it helps drive the U.S. dollar on a smooth, steady ride straight into the stratosphere. And on the day the tides turn back to inflation, currency investors can anticipate an even bigger profit bonanza.” This comment at the end leaves me speechless. If the U.S. dollar goes straight into the stratosphere as you say, then that stronger dollar would make it even more difficult to pay off all of the dollar denominated debt, both private and public, that has been taken on in both the U.S. and in other countries. I should think that the tide turning back would then be more like a tsunami in that case. Can someone please help get my head around this.
a strengthening dollar would make it easier for us to pay off our debts. many a large country has successfully inflated its way out of debt – just a many a homeowner has.
I know what you are saying $1,000 gold; but when the dollar gets stronger debt outside the US that is denominated in US dollars (both private and public debt) will be like further inflating a balloon that is already about to burst. Keeping it simple, just look at Canada as one example; and many many other countries where USD loans were preferred because of the lower interest rates tied to USD denominated loans. It is foolish to think that there will not be repercussions all over the world as a result of massive loans to be repaid with the need to buy inflated USD with deflated local money. It will be like holding a tiger by the tail. How do you let go of this situation? Anyone who does not understand this, does not understand the world and the impact of exchange rate fluctuations in my opinion. The problem is that all the world can not inflate their currencies together.
A strong USD will result in crushing debt repayments in other countries. Put yourself in the other countries shoe, and tell me what you think they will do. Then tell me what the impact of what you think they will do will have on the USA.
Expanding and looking at another side of this multi-faceted situation regarding a strong USD. Dow at 31,000; forget it! Boeing or Airbus going to sell? Chevrolet or Toyota going to sell? Which one; you decide as the buyer. On and on! You decide as the investor which manufacturer you prefer. Strong dollar will result in cheap imports. So, what I can not get my head around is that there does not seem to be a consistent mind set at Weiss. Oh, and what about the price of gold?
Shall I continue on? “Boris and Kathy nailed it. It starts with China’s slowdown, which is quickly morphing into a deflationary collapse for the world’s second largest economy.”
So, if “deflation is great for currency investors because it drives the U.S. dollar on a smooth, steady ride straight into the stratosphere.”; please tell, will the deflationary collapse for the world’s second largest economy also drive the yuan straight into the stratosphere? And if so, how will the currencies of the rest of the world fare when the world’s two largest are launched into the stratosphere side by side? The USD goes up, the yuan goes up; and poof go all other currencies against the two biggies. Is that it? I am still left speechless and trying to screw my head around this. Well to be consistent, at least we will have to have a strong yuan by the side of the USD then; unless there is a presumption on the part of Weiss that the US is not going to participate in deflation along with the rest of the world.
china isn’t the second largest ecomony its the largest ecomony by gdp
u.s
GDP (PPP) 2014 estimate
• Total $17.419 trillion[8] (2nd)
• Per capita $54,629[8] (10th)
china
GDP (PPP) 2015 estimate
• Total $19.510 trillion (1st)
• Per capita $14,190[12] (83rd)
yanks need to stop dreaming about being number 1 those days are gone
“…has ‘successfully inflated’ its way out of debt”
Temporarily. Yeah right, Nazi Germany did it too. Temporarily.
This is all scary when one reads this, but knowing what appears to be coming is half the battle to come out ahead after this. To bad that lot of , so called ” smart ” people, can not see past their noses. Living in Canada has taught me a few valuable lessons. I have valued all your writings in the past and am able to adjust myself to the ” new ” reality.
Lot of people are getting caught with their ” pants ” down ” so to speak. It is sad but the warnings have been on the wall for a long time. It will be interesting what will happen in the near future and how people will react when the you know what hits the fan.
This Crash in oil was forecast way back during the early days of the 1st Cheney/bush Administrations when Cheney called all of the oil people together for those meetings to “help the consumers”…. Suddenly billions of oil contracts were being bought and oil soared to $140…. That brought a flood of drilling and now we have an oversupply… Big surprise aye?
Any 1st year University Business Student is taught that if the powerful mess with the Supply/Demand curve, it eventually comes back to bite them in the butt! Now that is simnply happening…
News break, the ONLY people being hurt by this Oil Crash are the oil people….. That is freeing up a lot of money that will be spent on other, much cheaper goods, now that oil is falling… And with that freed up money flooding the markets the economy and the stock market will improve….. For heavens sake, this is a Democratic Administration, not a Republican one…… Enjoy the improving economy and stock market that began with Obama being elected, just like the same happened in 1932 with FDR!…. :)
Eagle…”only people hurt…are oil people”….Not hardly! 250,000 layoffs is not just oil people. It’s secondary businesses of oil, it’s railroads, it’s truckers. Improving economy? Only touted by the emperor. Most new job creation are junk jobs. We’re hemorrhaging decent jobs.
Money back into the economy ? Most of the jobs created are low income, also a seasonal adjustment added 281,00 to last months employment numbers, then everyone’s healthcare costs went up a lot, wiping out the gasoline savings; couple this with no increase in Social Security payments for millions of seniors, and I fail to see the money coming into the economy. What am I missing that makes you so optimistic. And you give ‘credit’ Obama for this great economy !!
You are one of the ones that helped create this mess by voting for Obama
it was oil that precipitated the crash in 2008. $4 bucks per gallon at the gas pump brought this country to a screeching halt. now it’s possible it may do it again, only this time in reverse order.
As I pointed out elsewhere, gold has not only been trending down since 2011, but has been in a down channel for the last 2 1/2 years. Until it breaks that channel, it is generally headed toward some ultimate bottom. If it breaks on the up-side, it may begin forming that bottom. After such a decline, it seems unlikely to be a V bottom such as Larry seems to think.. It should need a period of consolidation before a new up-trend. Of course, that is my thought, and the markets could have other ideas. Keep your eyes open, and be cautious. Much the same goes for other declining markets. As for the “Silk Road”, that is China’s ultimate plan to dominate trade between Asia and Europe (and maybe Africa). It will not be derailed by shorter term problems.
gold has been responding favorably to crisis mode and easing by the fed. we may see that happen again. watch the fed.
chuck, gold has been responding favorably to crisis mode and easing by the fed. we may see that happen again.
thank you, Edouard….I still have gold and gold shares from a couple of years ago when Larry Edelson said that gold was set to explode and that he had never seen the conditions so good for rising gold…how he predicted that last October 5th all the curves were lining up for a collapse in the stock market…yes, he even gave an exact date….and when the date passed and nothing happened, Larry never blinked or apologized…he just kept making more predictions. Yes, even a stopped watch is right twice a day.
Steve, didn’t Larry forecast that the “ride through Hell for 5 years” would begin on October the 5th and that Stocks would have a correction down to around 16,000; so far he has been correct and his cycle forecasts, in most of 2015 have been good, no one I know or read is close to perfect, in the end read a lot of forecast and make your own analysis and decisions.
If it is a 24-hour watch/clock with a second hand, it is only right once a day, and only for one second.
Gold has gone up a bit for some time when expressed in most currencies other than the dollar; and a little recently in dollar terms as well. But if the Dow goes to 31,000 and the dollar takes the smooth steady ride into the stratosphere as we are told today it will, then how does this all tie in to Larry’s prediction about rising gold prices; or is Larry hedging that one on another currency?
One thing to remember about China: historically, the Chinese have been a commercially minded peoples. In cities, small towns and islands across the world, if there are Chinese present, there will be Chinese owned businesses of one sort or another. It has to be a very small town in the U.S., not to have at least a Chinese restaurant, for example. It is very interesting to see how the communist government of China is trying to deal with this natural impulse of it’s people to own a business of some sort. In the long run, that impulse should win out over a political/economic theory.
Hi Martin
As you can see there is a lot of market noise about oil. An assessment of the contracts has shown that for February, there were a number of traders left in positions who did not want to take delivery. Unloading and taking a loss is preferable to forced delivery. You can see this in the spike in the March contracts. There’s also been a lot of noise about the supply/demand equasion. What has happened is the near bottoming in stocks built around these issues. Opportunity is a gift unseen by most and although I’m a little under water, I’m in there.
We need to consider a further the comments on China.
If you can believe anyone’s figures (ours included) then yes China’s growth has dipped. However, can you think of any western country that wouldn’t like 6.9% growth. Also their whole work ethic is different than many others. If things were really a disaster there then you would see it. Their stock market aside, what I see is an economy with much to admire facing almost insurmountable challenges. It will end positively.
Your predictions on Gold and Silver have been off their mark for quite some time. Why should we value your current predictions on deflation, commodities, ….. currency?????
there should be at least one person at weiss that can look up every oil bottom for the past 50 years and see what happened to the market. i looked up every oil peak for the past 50 years and every one of them put us in recession. so what happens at a bottom???
Social Security could be fixed over night. It just needs to be returned to the way it was designed. Social Security was never designed to be a welfare program. It was designed that only people that paid into it were the only people that were paid out of it according to how much a person paid into it over their life. I am sick of it being referred to as an unfunded program. I funded my part of it over a lifetime. Our thieves in Washington need to separate out the true welfare and create another program for that. What the thieves have done is steal from my retirement fund that I worked for to give it someone else.
With the Obama administration standing behind Saudi and its “market share” turmoil on the heels of Ukrainian occupation and all the so called ongoing production by the reported U.S. ramping up in protest of. It is a cying shame for all the fired oil and energy workers. Have an inclination to ask perspective presidential cans what / would uou do if Putin invaded Saudi as you took office. Shutdown strippers in front of Iran? Will it be enough to go unnoticed. Will Putin invade if oil trickles under $25? One way or the other? As someone stated here last week “Its a dirty game.”
As a member of both Martin’s portfolio and martin’s stock option portfolio, I’ve noticed something recently. There is no consistent information among the analysts. Some say things are trending up, others say they’re trending down. At that rate, someone is always right. Recently, Larry said Gold has bottomed and will trend up, in addition, just today the stock option service is recommending that we buy the oil ETF, UCO, as oil has bottomed and will soon go up, but this article speaks to commodities will continue to decline. It is very confusing for the consumer of the service like myself, and to be quite honest, I feel like a player at a shell game. You make it look and sound so easy… until you put your money down. Good luck everyone. It’s rough out there!! :-)
Note this important message – Bruice
Mike Larson sucks!
Now you keep censoring peoples’ comments criticizing this idiot Larson and see where it gets you.
Why you delete comments critical of baby Mike Larson and his sensationalist, adolescent, Boy who cried wolf trite scare mongering, cheap thrill ideas and articles?
As noted I’m less concerned about the return on my money than the return OF my money.
But if you have money to burn and you want to bet on blood in the streets than JNK has been a gimme but at $32 It is near its 2009 low of $29 or so. Massive short covering can happen. IF
It bounces and takes out $28 to be safe or just knifes through $29 then blood in the streets will not only kill stocks but boost gold as flight capital from point a to point b and it won’t be
fun getting out of Dodge. So watch JNK $29.
Traders want trades, and powerful forces want to even out markets (many Dodges
in Dodge..) I think oil is the big story, but I´m not sure.
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