The weather is getting warmer here on the Mediterranean coast, and the economic attitude in Spain and on the continent seems to be following suit. The word here is a mild recession is coming, and it may not last long, if the current movement toward getting the debt issues under control keeps moving forward. The recent deal to help ameliorate Greece’s debt seems to have assuaged the market here, at least for the moment, and now the talk is shifting from fatalistic to a cautious tone that speaks to a possibility that control over the widespread debt is possible, if …
We will know more about the possibilities in just a bit more than a week. The new EU economic accord is coming up for a vote and the ECB will issue its second round of liquidity for the banks. If the EU accord goes through, we can expect to hear from the ECB on two other fronts – lowering interest rates to stimulate economic growth and expanding its role in protecting the financial sector. Mario Draghi (ECB head) might feel empowered on both fronts as well because of the ECB’s mandate – to control inflation. At the moment (sans Iranian oil issues), inflation seems under control.
Inflation for the euro zone this year should come to nearer to what the European Central Bank judges about the right level for stable prices and a healthy economy: 2.1 percent.
Yet, even if the market here and in the U.S. starts behaving as if things are getting better in the key areas (economics and debt issues), all that might come to an abrupt end, as the U.S. has another round of political grandstanding coming up soon enough, maybe late this Spring. Here we go again. The debate on raising the U.S. debt ceiling is coming. The gauntlet of potential troubles is still tough to get through.
If you folks are not reading Futures Magazine’s weekly e-newsletter, “Market Pulse,” consider subscribing. It is free, and if you are trading commodities or futures, Gary Kamen is one analyst that does an excellent job of dissecting issues in this area with real numbers from real sources. Below is an excerpt from one article I found quite enlightening, and it points to one reason gas prices in the U.S. don’t seem to be correlating with reality.
With US unleaded gas demand at 10-year lows, why the highest prices for this time of year? RBOB is at all-time highs for this time of year, even though we see U.S. demand for gasoline at 10-year lows. So why is gasoline so high? Maybe it has to do with the fact that in 2011 the United States’ number one export was refined fuels. That is, the United States exported more unleaded gasoline, diesel fuel, and jet fuel than any other export, a total of $88 billion worth. For the five years before 2011, the number one U.S. export was airplanes.
I hope all the folks myopically focused on increasing domestic oil production as the sole means for weaning the U.S. off imported oil read this factual explanation. It appears that more of the oil we produce and refine is going right out of the U.S. to other markets. From a trading perspective, one has a place to look for trades. From a reality perspective, one needs to understand that no matter how much oil we produce or refine, the market is the market, and oil companies will always sell to highest bidder. U.S. oil companies are under obligation to serve the needs of the U.S. and its citizens, and I suspect this will not change.
Trade in the day – Invest in your life …
