Posted on 12/12/2014 12:24:04 PM PST by Kaslin
Stocks opened under pressure and never put up any kind of fight. The carnage was evenly distributed, but the epicenter was oil. Already under pressure, the weekly inventory numbers point to a build in supply rather than a drawdown. The implication is that there was weaker demand. Remember, thus far; the narrative is cheaper oil, solely because of a slowing global economy outside of the United States, but what if demand is declining here, too?
It is bizarre. A major asset class could lose 40% of its value in a flash, and not rankle or worry investors of other assets. There is no way I could have imagined crude testing a vital support point, and now entertaining the most outlandish downside targets. Heck, if someone says ‘West Texas Intermediate’ could hit a dollar, I might not bat an eye. However, crude oil is oversold and it will see something of a snapback rally. This does not mean there will not be more of a downside first.
Through it all, no one knows why this is happening.
Sure, it’s basic supply and demand; there are more sellers than buyers. However, what is really driving this meltdown of black gold is that a few months ago, it was supposed to head towards $150, as people worried that ISIS terrorists would conquer Iraq and Syria.
So, now crude has to hold at $60.00, or we could start hearing calls for $30, $40, or even lower – and entertain them.
Fiscal Responsibility and the Lame Ducks
Maybe this year and next, there will not be a government shutdown, as the House will get a chance to approve an omnibus spending bill through September 2015. The 1,600-page bill is making a lot of people unhappy, especially those who were overjoyed the day after the mid-term elections, because many thought this would be a brave new world.
Instead, the bill is chock-full of goodies and gobs of questionable spending, such as $5.4 billion to combat Ebola.
The $1.0 trillion spending bill reminds us of the challenge ahead to rein in spending which is on an unsustainable trajectory. In fact, to save social security and other safety nets that Americans expect, even mandatory spending will need to be tweaked and sacrifices made. Mandatory spending was less than 27% of the budget in 1965, and it will climb to 63% by 2024.
What's really amazing is how much waste and fraud runs rampant in government spending, especially in those programs designed to help the neediest in society.
A shocking November 7 audit of food assistance programs discovered fraud and misallocation of funds.
| Food Assistance Fraud | Program | % of Budget |
| $2.4 Billion | Food Stamps | 3.2% |
| $1.7 Billion | National School Lunch Program | 15.3% |
| $923 Million | National School Breakfast Program | 25.6% |
| $206 Million | WIC | 4.6% |
Then, there was this shocker from the Treasury Inspector General for Tax Administration (TIGTA) of Federal programs designed to help working Americans with lower wages.
The Earned Income Tax Credit saw $14.5 billion or 24% of the total budget paid in error, and up to $7.1 billion might have been misallocated in the Additional Child Tax Credit program; that's 30% of its budget.
| Low Income Aid Fraud | Program | % of Budget |
| $14.5 Billion | Earned Income Tax Credit | 24% |
| $7.1 Billion | Additional Child Tax Credit | 30.5% |
The level of abuse is amazing; just Google “food stamp fraud” and you will see headlines that read, “Teacher in Atlanta steals $8 million.” The list is endless. Here is my theory on all the fraud. I think the government deliberately leaves in ways to steal or game the system as a way of keeping people tethered to the system.
When people think they are getting over on the system, what they are giving up in terms of self-determination is too high of a price to pay. My goodness, how do 25% of funds in a federal program go missing? It sounds like something that would happen in Gaddafi’s Libya.
Or Mugabe's Zimbabwe. Apt analogies, both.
“A major asset class could lose 40% of its value in a flash, and not rankle or worry investors of other assets”
Could that be because deflation rolled in like a huge wave about 2006 and every nation with a printing press has been in overdrive since then in a desperate and futile attempt to stop it?
Maybe next year.
We are paying $2.45/gal in suburbs of Cincinnati. The malls are chock full of shoppers and there are sugar plums dancing in the air.
300 million barrels of crude oil in above-ground storage worldwide, plus 1.8 million barrels per day being produced above consumption.
That sounds low. I believe most of the world's oil storage is above ground.
EIA estimates that OECD commercial oil inventories totaled 2.55 billion barrels at the end of 2013, equivalent to roughly 55 days of consumption. Projected OECD oil inventories rise to 2.64 billion barrels at the end of 2014 and 2.71 billion barrels at the end of 2015.
A mere 28% of welfare ends up in the hands of recipients. That means 72% is devoted to, what, administration?
Don’t trouble yourselves over a mere 1/4 fraud. Welfare programs are 3/4 fraud and bloat.
Are there plots of how much Diesel and Fuel Oil are not yet sold?
Distillate fuel oil: A general classification for one of the petroleum fractions produced in conventional distillation operations. It includes diesel fuels and fuel oils. Products known as No. 1, No. 2, and No. 4 diesel fuel are used in on-highway diesel engines, such as those in trucks and automobiles, as well as off-highway engines, such as those in railroad locomotives and agricultural machinery. Products known as No. 1, No. 2, and No. 4 fuel oils are used primarily for space heating and electric power generation.
I haven't found that for world-wide.
Do these numbers represent all product that has left the refinery processing equipment but not yet ended up in the users tank (vehicle/home heating oil tank) - includes gas station inventories?
Because of who has to report, I believe that would be product in refinery tanks, blenders, terminals, etc. Quantities that have not moved to the final retail location. But I could be wrong.
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