“Bomb Iran
“Bomb, Bomb, Iran
Bomb, Bomb, Iran!
Oh, Bomb Iraaaaan!”
–Vince Vance & the Valiants, 1995 redux
Oil’s underperformance amid further escalation in the Middle East point to an opportunity
October 15, 2024 – Bubblin’ crude is down nearly 5% this morning. The quick move sent us over to the trading desk to look at technicals.
Light crude is in a downtrend over the past few months, with only a slight pop higher on war fears over the past few weeks. It stuck in a technical “no man’s land” between its major moving averages.
Yawn.
But on a fundamental level, there’s a strong case for adding to your oil position now. If you’re a paid member of the Fraternity, you can read it in the “Trade of the Decade” report, under the special report section of our site.
You may recall that we developed it in partnership with Dan Denning and Tom Dyson of Bonner Private Research. We developed the first Trade of the Decade—buy gold/sell stocks—back in early 2000, covering the Tech Wreck. It worked out nicely for those paying attention at the time.
This decade, we’ve been watching oil. Dirty energy is so maligned by the climate-conscious that we expect it to offer many good buying opportunities in the 2020s.
Israel is promising to deliver a wider war across the Middle East. As we noted yesterday, Americans now have boots on the ground there.
In addition to the resource play, a wider conflict could also pop a nervy institutional bubble in AI stocks, which we detailed in our latest research also released yesterday.
You can find our latest analysis on what we expect will be an unsettling time for AI stocks on the broader indexes.
Meanwhile, Bill Booner, founder of Bonner Private Research and my Empire of Debt co-author, tells how he expects the war in the Middle East to progress. ~~ Addison
War and Money
Bill Bonner, Bonner Private Research
Cynicism is an attitude characterized by a general distrust of the motives of others. A cynic may have a general lack of faith or hope in people motivated by ambition, desire, greed, gratification, materialism, goals, and opinions that a cynic perceives as vain, unobtainable, or ultimately meaningless.
—Wikipedia
Today, we add a word to the English vocabulary, which provides a step up for everyone trying to understand public policies.
Cynicism questions the motives of others. Our new word, ‘cynicalism,’ is a way to avoid being harmed by them.
In public life, people claim to improve the world. “Do this,” some say. “Do that,” say others. Cynicalism tells us what is really going on: whatever they are proposing won’t work… and the people suggesting it are frauds.
Yesterday, we got the latest inflation report. New York Post:
Inflation rose more than expected last month — dimming hopes for another big rate cut from the Fed
The Consumer Price Index rose 2.4% versus a year ago in September — above the 2.3% increase economists had expected, the Labor Department said on Thursday.
Month-over-month, the CPI rose 0.2% — steeper than the 0.1% increase economists had expected but even with the 0.2% number from August.
“Core” inflation — a metric closely watched by economists that excludes the volatile costs of food and energy, rose 3.3% versus a year ago, also ahead of economists’ prediction for a 3.2% year-over-year increase.
The Fed promised to boost the economy with low rates. But it kept rates far too low for far too long. GDP growth slowed. And now, the Fed can’t increase rates to fight inflation; there’s too much debt. Higher rates would cause the economy to cave in. It’s ‘inflate or die.’ The Fed’s only choice is to inflate… so as to lower the real value of the debt.
What should you do about it?
“Whatever they tell you to do,” a French friend quoted his father, an early cynicalist, “do the opposite.”
In the father’s case, he was mayor of a small town in France in 1944. A German soldier had been shot nearby. The German officer told him to have all the people of the town assemble in the town square in the morning.
“It was a death sentence,” our friend explained. “There were going to be reprisals. Maybe ten citizens would be killed. Maybe all of them. So, my father spread the word… and they all went and hid in the woods.”
Cynicalism can protect you in many different circumstances. For instance, a stockbroker tells you he has found the ‘next Nvidia.’ Cynicism makes you wonder why he doesn’t keep it to himself. Cynicalism tells you to ‘just say no.’
However, cynicalism is particularly valuable for evaluating public policies and their effects on your wealth. As Ronald Reagan used to say, the most dangerous phrase in the English language was: ‘I’m from the government, and I’m here to help.’ Cynicalism tells you that whatever he’s promoting will be a scam and a failure.
Most issues don’t matter very much. But two of them matter a lot — war and money. That’s why the Constitution puts them in a particular category — insisting that people’s representatives in Congress take charge.
In both cases, Congress has not only dropped the ball but shredded it. We are now engaged in two major wars, supplying material and intel. Most people are opposed to both of them; they’d rather see the money spent on hurricane relief.
But where’s Congress? Where was the discussion over how we would pay for the war? What are we fighting for? And is it worth it?
Didn’t happen. Congress ducked.
And how about the budget? Even the biggest drumhead in Washington knows that you can’t continue to borrow, print and spend as much as you want—not without consequences.
‘The wars will make us safer,’ say the feds. ‘And the lower rates will make us richer.’
Cynicalism tells us not to believe them. ~~ Bill Bonner, Bonner Private Research
So it goes,
Addison Wiggin,
Grey Swan
P.S. Israel plans to bomb Iran before the U.S. Election. Or so goes the scuttlebutt from the Empire Salon, a roundtable of foreign policy journalists we became associated with while barn-storming the Empire of Debt twenty years ago.
And yet: The popular CNN Fear & Greed index rose to 77 points, the highest level since March, and entered extreme greed territory.
“It’s not exactly an indicator showing greed or fear among investors,” writes the Global Markets Investor, “but a useful metric based on 7 important stock market measures that show how much they diverge from their averages.
“In other words, it highlights extremes of the stock market and can signal short-term pullbacks or bounces.”
The Fear and Greed index is right in line with our forecast for AI stocks in the month of October, as we noted in our September monthly writeup.
P.P.S. Regarding yesterday’s Midas Touch essay, reader T.M. writes with some passion:
Thank you for publishing Scott Ridder’s essay! As one who also lost not only my fiancé but four other classmates in the Vietnam War, I couldn’t agree more with the perspective of our interventions and the wars we have been involved with elsewhere in the world. Alas, greed, stupidity, hubris and revanchism are the Four Horsemen of the Apocalypse, and we are indeed at the end of times.
I recall thinking Biden will get us into World War III as I watched that ‘feckless, dementia ridden, piece of crap in the White House who still thinks he’s a Senator…” ––as Biden was so aptly described by Kathy McCollum, whose son Rylee was killed in Kabul along with 12 other Marines––leave our allies to rot in that hideous withdrawal from Afghanistan.
Why that devil who is too demented to campaign is still President and hasn’t resigned is a question that should be asked. Kamala would then be sworn in, and people would get a taste of the horror to come if she is elected. With that beast at the helm, he is flying our country blind and rudderless and leading us into perdition.
Alas, I am surrounded by Harris-Walz signs here in Colorado, where apparently a possible third assassination attempt on President Trump was thwarted yet again when he recently came to Aurora––although there is hardly any mention of this in the media.
Please send your own comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com
