I try to keep up with the economic data and numbers daily. I don't have any reason to aside from a year and a half's worth of state pension funds invested in some mutual funds, but I find it interesting.
All of this talk of recession and slowdown is a bunch of bollocks. I know that goes against conventional wisdom, but the major market numbers do not line up with the data being reported. Take oil. Oil rose yesterday to an all time high of somewhere close to $110 a barrel. That is outrageous and should only happen if there is some major supply shortage or a multi-national conflict amongst two or more OPEC countries. You only get prices that high when gas isn't available.
Yet today, the oil inventory report came out with a 6.2 million barrel increase in the supply of oil. 6.2 million barrels versus analyst expectations of a 1.7 million barrel rise. Gasoline rose something like 2 million barrels versus a projected gain of 300K. We have oil and we have gas...yet the prices are high for reasons that have nothing to do with the market. These kind of numbers can't go on forever and, like the internet boom a few years ago, once enough traders get a clear sense of direction on the issue, the prices will come tumbling. It might happen slowly, but these sorts of numbers can't stay like this for long.
If there is a slowdown (and I don't think it is a sustained one) it is happening because prices of common goods are too high. Buying bread and milk leaves you with less to spend on other things, causing a slowdown in consumer spending. The trick here is to get the commodity prices down and it all starts with oil and gas. We the consumers are pretty powerless to do anything about it, but once the oil "bubble" bursts things should come back to normal.
I'm actually quite surprised that none of the major candidates are trying to force the bubble to burst themselves. Calls for windfall profit taxes or economic stimulus packages that would move money out of oil would do this. The Democrats may be calling for this stuff and it isn't reported in the press, I don't know. A price control on gas to the 2.50 or 2.25 level for a gallon of regular unleaded would cause the oil prices to drop, but could also cause investors to panic.
If the bubble bursts before October, this benefits McCain, as Bush's economic platform no longer looks like a drain on the economy. If it bursts after November it helps which ever Democrat wins the White House as they can take credit for the end of the recession even though it would have ended anyway. The conspiratorial part of me can dream up a scenario where Democratic-leaning bank officials prop up the price of oil using hedge funds and the like to keep the economy declining, therefore increasing the election chances of the Democrats. I don't think that is going on, but it wouldn't surprise me if it was.
Wednesday, March 12, 2008
On Gas Prices and Elections
3 comments:
Haha, what? 85,000 jobs lost in the last two months. Oil prices skyrocketing, commodity prices growing. Consumer spending in the holidays fell, current consumer spending falling. Housing market fucked, mortgages on rampage. It's not the strictest definition of a recession, but calling it bollocks is bollocks.
And the only thing that is going to get McCain elected is war with Iran. The conspiratorial part of me can dream up a scenario where Bush shoves all-in against Ahmenidinajihad to set off WW3 and increase McCain's chances. Speaking of that, CENTCOM chief Adm. William Fallon's retirement? Fishy.
You can have a housing market slowdown and not have a recession. In the 1920s, the housing market collapsed in 1925 and the stocks didn't fall until 1929. I think the Fed has taken enough steps to soften the blow and get the economy going again.
And I disagree that McCain can't be elected. he has a better chance against Clinton than Obama, but McCain doesn't carry the anti-conservative stigma that a lot of Bush Republicans would have. Romney would get dusted. McCain has a chance. A war in Iran would guarantee a Democratic victory.
You can have a lot of single occurrences and not be in a recession, but these things are piling up. First back-to-back months with job losses in five years. The housing market isn't just slowing down; a trend has cropped up of people simply walking away from their homes because the mortgages are more than the house is worth. The subprime crisis is effecting other aspects of the economy. Rising oil prices are affecting everything. Large corporations have excessive amounts of cash on hand, which can be a bad sign if the reason behind it is that there are no investment opportunities. It's not absolutely certain that we're in a recession and it's usually not known until we're out of one, but signs are pointing to yes.
I wouldn't say McCain is patently unelectable, but honestly whoever wins the Dem nomination just needs to run this commercial over and over again (maybe a hundred years? Say what?) to ensure that McCain goes back to Arizona in December. That said, the only way war with Iran would benefit Dems is if the American people suddenly realized that the Republican party shouldn't be trusted with anything, which is kind of what one would expect to happen in 2004.
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