Friday, January 9, 2015

What Could Happen?

The US stock market rally, and the rally in the US dollar has been predicated on a strong US economy, and weakness around the world. We have ignored the weakness around the world, perhaps thinking we are continuing beneficiaries of American exceptionalism. Whatever the hell that is.

The markets are worried that the sharp decline in the price oil will destabilize the junk bond markets due to the debts taken on by shale oil and gas producers. But over the last weeks we seem to have rationalized that perhaps we can get by with any oil price around $50. And we get greedy over all those new dollars in peoples pockets that they will surely use to buy extra gadgets at Walmart.

But the whole thing is predicated on an economy that continues to grow, however slowly. What if that ain't so? Hidden in the employment numbers today, strong though they were, was that little thing about a lack of wage increases. If wages aren't going up, even a little, where is the demand for workers.
However it turns out. I am struck by the coincidence of the US Dollar starting it's clime last summer at exactly the same time that oil commenced it's own decline. What does the oversupply of oil have to do with the US Dollar strength. Particularly when demand for oil worldwide is reportedly not strong.

Perhaps someone can tell me the answer. It is probably simple. But it seems to me that it is altogether possible that oil is indeed part of a slowdown in the works, worldwide, not to exclude the Exceptional Americans.

Ignorantly yours,


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