The noise coming out of OPEC this morning is a bit disconcerting. I read that some members are unhappy about dropping oil prices and that Saudi Arabia is cutting its production a wee bit.
‘It’s very clear there is a tremendous surplus that has led to this severe decline in prices in a very short time span,’ Luaibi [OPEC President] told reporters. ‘This will not serve anyone.’
The president of OPEC presents the argument that oil at a $100 – $120 per barrel is reasonable. From a purely market driven perspective, this might well be true, but if OPEC wants the global economy to recover, oil prices need to be even lower than they are now. As to who gets served from lower oil prices, well, either the rich get richer quickly with oil-price gauging or the rich get richer slowly with even-handed and fair market policies that benefit the masses. It seems to me when everyone is served, the train keeps on moving, which means everyone is carried forward. Think about that Mr. OPEC president …
China’s inflation, industrial output and retail sales all flagged in May for a second straight month of sluggish growth that galvanized policymakers last week into taking their boldest action yet to combat a sharpening slowdown.
Oh, really, China’s economy is slowing down and policymakers are taking steps to gently slow the decline in growth? On the one hand, the market sees the above and winces and, on the other, it reads the words below and thinks, “Okay, maybe China is on top of it.”
China’s bank lending in May rose more than expected, suggesting fast-tracked infrastructure projects were creating loan demand and that measures to counter a sharpening economic slowdown may be taking affect.
This is the nature of the uncertainty out there. The coin is constantly flipping in the air. First one sees heads and then one sees tails. Attempting to conclude which will be up when the coin lands based on the momentary view is somewhat pointless. Drawing a conclusion based on probability (not odds), is another altogether. Based on historical evidence, it is probable that China will successfully reinvigorate its economy, just as it has done for some 50 years since it began its quasi-capitalist journey …
The same holds true for Europe. The political coin is flipping through the air right now.
French President Francois Hollande is on track to win a solid parliamentary majority after a first-round election that leaves him strengthened heading into a flurry of talks with euro zone leaders that could make or break the currency union.
Which side will show when the coin lands creates uncertainty, but, as a betting man, I will go with the historical probabilities here. Europe has a history of surviving political and economic turmoil, just as the US does, and given that the two entities represent the most successful economic enterprises the world has ever known, and given the combined economies of Europe and the US create a $32 trillion pot, me thinks the politics point to surviving and thriving, eventually. My guess is the market will see it this way, as well, eventually.
Trade in the day; Invest in your life
