Welcome back. I hope everyone that celebrates Thanksgiving had a good one. I certainly had a leisurely five days. I had time to read a lot. It is amazing what one can pick up after five days of reading.
So here is what I learned in the last five days of reading. The world is still a nasty place because stupid people are killing innocent people, but it is also full of hope for many others, particularly on an economic front.
- German unemployment fell and the jobless rate reached a record low as businesses and investors become more confident that Europe’s largest economy will keep growing.
- Investment in the fast-growing market for Internet-connected devices gathered pace this year and is set to attract more top U.S. technology and telecoms buyers of firms active in the market, a report from a merger advisory firm said on Thursday.
China is still lagging on the economic front, but that is not a bad thing, actually. The Chinese economy needs to slow its pace of growth. Europe has been the question mark. Now, with Germany showing signs of a rebound, things could get better all the way around the globe.
As to the “fast-growing market” for Internet connected devices, well, that offers opportunity for those interested in making money in the market. This area is rapidly developing as manufacturers jump into the game with “smart” devices that can operate wirelessly, devices such as ovens, refrigerators, and thermostats. Oh, and don’t forget about hot tubs.
And folks will have the money to buy these slightly-more-expensive products, as it appears that oil is headed even lower. Remember, it is not about the price right now; it is about market share.
- The fracking boom has driven U.S. output to the highest in three decades, contributing to a global surplus that Venezuela yesterday estimated at 2 million barrels a day, more than the production of five OPEC members.
It is also increasingly evident the price of oil will remain lower for a while, especially since Saudi Arabia nixed any production cuts for the near future, as it tries to hold onto market share.
- Demand for the group’s crude will fall every year until 2017 as U.S. supply expands, eroding its share of the global market to the lowest in more than a quarter century, according to the group’s own estimates.
Understand that declining commodity prices, especially oil prices, are good for the market, despite the analysts and talking heads telling us declining commodity prices are bad for the market.
- No benefit is as unambiguously positive for any entity in the oil bear market as it has been for the American consumer. Consumers may see a ripple effect in shrinking prices for such things as food and capital goods as the cost to transport them goes down. A corollary to money saved on staples almost invariably is an increase in discretionary spending. An externality of this will be of benefit to retailers; who see revenues rise as consumers’ wallets grow.
“Unambiguously positive” is right. Already we are seeing the rippling effect of lower gas prices at the pump. And the timing is right, just right. With employment rising, wages rising, and corporations banking higher profits, the pump is primed for an economic US lift off.
- In 2013, about 134.51 billion gallons1 (or 3.20 billion barrels) of gasoline were consumed in the United States, a daily average of about 368.51 million gallons (or 8.77 million barrels).
A quick calculation of the above tells me that for every 10-cent drop at the pump, the US consumer has $37 million more dollars to spend on a daily basis. On an annual basis, that breaks down to about $13 billion more dollars in the pockets of US consumers. Factor that out to a dollar drop and you have, well, lots more money available to the US consumer, say, to the tune of $368 million per day. Now, someone please tell me, how can that be bad?
Trade in the day; invest in your life …
