- T-minus three days to the OPEC meeting as crude hovers near $77
- Handicapping the OPEC outcome: Is broiled rodent on the Thanksgiving menu?
- More U.S. stock records: How far the indexes can fall before you should worry…
- Japan in recession, but stocks soar. What gives? And should you jump in now?
- Reading the recession tea leaves… lamest New York Times correction ever… Thanksgiving dinner with $3 pie and $75 wine… and more!
So much for Americans existing “at the mercy of OPEC.”
According to the Financial Times, U.S. dependence on oil imports from the OPEC countries is now its lowest since May 1985 — when the big box office draw was Chuck Norris in Code of Silence and Wham! topped the charts with “Everything She Wants.” (A wretched month for pop culture that was…)
The salmon-colored rag crunched some numbers from the Energy Department and concluded OPEC’s share of U.S. crude imports is now a mere 40%.
What the paper didn’t point out, but we will, is that because imports account for only 40% of U.S. oil use nowadays… that means we depend on OPEC for only 16% of our total needs.
We point all this out as prelude to this week’s meeting of OPEC ministers in Vienna. Will they cut production to prop up prices?
Let’s consult three reliable experts, including one of our own, to get the lay of the land…
“It seems to me that this is a bit of an artificial move,” says commodities investing legend Jim Rogers of crude’s 30% tumble this summer and fall.
“The Saudis, from what I can gather, are dumping oil because the U.S. has told them to in order to put pressure on Russia and Iran,” Rogers tells Business Insider. “And it’s probably not a real move.
“I read about shale oil like you do. But at the same time, North Sea production is declining. Russian production will start declining next year. All the major oil fields that we know about — all the production is static or declining. So it doesn’t quite add up on any kind of medium-term basis I can see.”
“I smell a rat,” says our acquaintance Erik Townsend, “and it will be served on Thanksgiving Day” — the day of the OPEC shindig.
Mr. Townsend, a commodities trader and hedge fund manager, points out Thanksgiving is not a holiday in the rest of the world. So the commodity markets are open… but liquidity is perhaps the thinnest all year because “most of the traders that are running most of the money are all in New York, and they’re with their families.
“You don’t schedule [an announcement like] that on Thanksgiving Day by accident,” Erik suggested during his weekly spot on the Financial Sense podcast. “You’ve either got to be completely incompetent, or you’ve got to be intentionally trying to take advantage of that thin liquidity.
“I predict if they [OPEC] do cut back on production, we’ll see a massive spike in oil prices. because we’re trading into thin liquidity, and that’s conducive to extreme volatility.”
Crude is holding onto its gains from late last week — a barrel of West Texas Intermediate going for $76.96.
“Thursday marked the biggest daily rise for crude since early September,” says Matt Insley of our energy desk. “I won’t put too much weight on one trading day — but our thesis that oil prices are close to a bottom is panning out nicely.
“And if we’re right,” he told Real Wealth Trader readers on Friday, “we’ll make a killing.
“We’re still below the $85 psychological threshold (a price which I think many drillers and oilmen hold dear). But it appears that the decline that we’ve seen in crude prices over the past few months may be over.”
And this week’s OPEC meeting will only fuel the action, Matt suspects: “Up until now, the Saudis have done nothing more than posture for oil price wars. If they change their tune — which I believe they will — we could see a nice rebound in crude. Heck, we’re already starting to see it!”
[Ed. note: The “killing” to which Matt refers is a trio of plays he’s recommending to every new reader coming on board Real Wealth Trader this month. Gleaned from what he learned recently at a closed-door meeting in Houston, Matt believes they have the potential to triple your money before the end of January.
Intrigued? We have only limited space for readers to seize on the opportunity. Take advantage at this link.]
The major U.S. stock indexes are inching higher into record territory. As we write, the S&P 500 is less than a point away from 2,070.
That’s still within the S&P’s upward channel going back to early fall 2011… but it’s on the high end. and “the risk/reward trade-off is beginning to get a little off-kilter here,” ventures Jonas Elmerraji of our trading desk.
“Support is all the way down at 1,900 in the S&P,” he points out. That means the index could tumble 8% from here… and still be in an uptrend. “I still don’t think a big correction is imminent just yet, but neither is more upside at our current pace.”
If you’re looking for evidence a new recession is approaching, you won’t find it in two of the most reliable barometers out there.
The Chicago Fed National Activity Index crunches 85 economic indicators. It has an uncanny record: A three-month average reading of minus 0.7 has signaled every recession but one since 1970; it was late with the 1973 oil shock.
The October three-month average released this morning is minus 0.01. That means economic activity is about as average as it gets, going back nearly 50 years…
Meanwhile, the Philadelphia Fed’s State Coincident Index also has a good multidecade track record. This figure crunches four jobs indicators from all 50 states. The best possible reading is 100; readings of 50 or below signal recession. The number out this morning is 92.
“Japan’s economy is in dire straits,” says our income specialist Neil George — who nonetheless has spotted a moneymaking opportunity.
“The Bank of Japan and the nation’s public pension system are dumping trillions of dollars’ worth of yen into bond buying programs (in amounts that would make the Fed blush) while also buying stocks by the trillions (which the Fed can’t even think of doing).
“So far, it hasn’t seemed to help the economy, which contracted 1.6% in the last quarter. Plus flooding the markets with yen is driving the currency into the basement. But it is causing the stock market to soar.”
“Don’t think Prime Minister Shinzo Abe is done yet,” says Neil.
“Abe recently met with Paul Krugman, the contentious, Nobel Prize-winning economist. Krugman believes that government is always the solution to economic and market challenges. To his thinking, governments facing economic malaise should spend, spend, spend and cut consumption taxes to drive the economy.
“The meeting convinced Abe to scrap a pending new sales tax and announce more bond and stock buying on top of the trillions already announced. Naturally, that’s encouraged Japan’s stock market. Tokyo’s Topix market index is up over 16% in the past four weeks alone.”
But now’s not the time to pile into Japanese stocks, Neil warns: “Abe’s moves are also sending the yen plummeting. While Japan’s market is up 16% over the past four weeks, the yen has fallen some 10%. So if you invest in Japan, you risk seeing your gains erased by the yen falling against the U.S. dollar.”
Still, Neil’s found a workaround, good for a quick two-week income play yielding an annualized 12.9% — the sort of play he identifies routinely in his premium advisory, Income on Demand.
So much for any credibility The New York Times might have once possessed…
In other words, Times columnist Joyce Wadler was taken in by an Onion-like website. Heh…
Because she’s “famous for being famous,” a gratuitous Kim Kardashian pic
[photograph © Glenn Francis, www.PacificProDigital.com]
“Wadler isn’t the only person who’s been fooled by The Daily Currant,” writes media critic Jim Romenesko. “I’ve noticed in my Facebook news feed that people are posting the website’s latest Sarah Palin story — ‘Palin: Send immigrants “back across ocean” to Mexico’ — and apparently not realizing it’s a goof.”
Really? We’d mentioned back in August that Facebook had taken to labeling satirical stories as “[Satire]” in response to user feedback… presumably because users made fools of themselves once too often.
But that’s the beauty of social media: You can expose yourself as a fool to a wide audience just like a New York Times columnist….
“Might be time to dump Chevron stock,” a reader writes, “as they failed to renew their lease in a major Texas oil field that supplies them with over half their light crude.”
The 5: It’s a moot point: CVX isn’t in the portfolio of any Agora Financial publication. Despite a 3.7% dividend, our editors see better opportunities elsewhere in the energy patch…
“I have sons with dual citizenships in the U.S. and New Zealand; they live in New Zealand,” writes a reader concerned after our recent write-ups about “accidental Americans.”
“Will they be expected to come up with IRS tax money someday?”
The 5: We have no way of knowing who among the millions of Americans living overseas the IRS might decide to target in hopes of collecting tax on their income earned overseas. Or when. Or for what reasons. Best to consult a qualified international tax professional.
From the reports we’re seeing, it looks as if people ensnared by the IRS are being given the choice of making arrangements to pay back taxes or surrendering their U.S. citizenship.
If your sons already have citizenship elsewhere, that gives them many more options…
“Dear fellas, YOU need to go shopping,” a reader writes, carrying on our cost-of-Thanksgiving-dinner discussion from last week.
“America is no longer going to contend with hormone turkey or GMO potatoes. We in the know will spend $5 per pound for an organically fed turkey or half that for a free-range one. Take that poundage above 12 (a must for meat) and you do the math.
“Oh say, what is in that $75 per bottle wine?” our reader goes on, addressing a fellow reader. “I get my organic one for $11.00. For the grandkids, maybe sparkling apple juice, but no milk, please — same reason as above.”
The 5: For the record, federal regulations already forbid raising poultry using hormones. (Antibiotics? That’s another matter entirely.)
But we get it: As we pointed out on Friday, it’s only with factory-farming techniques that the American Farm Bureau can boast about a 16-pound turkey costing $21.65.
“I found your statement hilarious!” writes another reader who wishes to tweak the fellow who wrote in on Friday about splurging on a $75 bottle of wine. He also mentioned a couple of “store pies” at $2.99 each.
“I’ll bet,” writes today’s correspondent, “you can easily tell the difference between store pies and those made at home and that you can’t tell the difference between $75 wine and $5 wine.”
The reader then directs our attention to a couple of articles, including one titled “Wine Tasting Is B*******. Here’s Why.”
“I always enjoy The 5,” our reader concludes, “especially when you have fun stuff like this!”
The 5: It does keep things lively during a slow holiday week…
Best regards,
Dave Gonigam
The 5 Min. Forecast