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Through Q2 08 GDP was muddling through with modestly positive numbers.

Then it hit the wall in July as crude oil and the commodities in general broke down courtesy of Mike Masters and Joe Lieberman.

Soon afterward the main street credit crunch intensified.

What I now suspect happened is that the US energy/commodity industry got the rug pulled out from under it as the transfer of nominal wealth from pension funds to passive commodity strategies to energy and commodity producers fell?

The straw that broke the camel’s back?

This sector had been holding up well with the higher prices, and energy producing regions had been doing reasonably well.

Domestically, the US produces about 8 million bpd of crude plus a lot of natural gas and other commodities that fell in price.

While the fall in prices benefited consumers, they were/are slow to react with more spending.


4 Responses

  1. Correct. In late summer the pension funds, hedge funds that focused on energy plays and the like started pulling out of their petro positions and yikes, the price of crude started collapsing. That and a rapidly contracting global economy helped push crude where it is currently. Being in the energy business as a producer, I miss the good old days. Probably shouldn’t say it but it’s true. It was fun while it lasted.

  2. Something else. Listen folks, Opec members cheat constantly. And when you factor into the equation the number of barrels of crude in pipelines, storage tanks, and ocean going tankers it all represents a lot of crude oil that usually doesn’t show up in published reports of oil stockpiles simply because nobody really knows what the total is. The methods used to calculate oil supplies are very imperfect. There is alot of oil that is actually in the marketplace but doesn’t show up in the official estimates. This explains the rapid and sudden price swings of crude oil. To quote John D. Rocefeller, crude oil is probably the worst commodity to speculate in. The events of this summer prove he is right.

  3. Warren, Let me give you my “Dirt Level” analysis.

    One in 10 house payments are behind, so scratch them from spending!

    Most of America lives in the suburbs, lives paycheck to paycheck, and ran the heck out of their credit card for the last year when gas was four bucks a gallon,(That’s over $100 per fill in most Americans fuel tank) so scratch them form spending!

    I don’t know where these employment numbers you see on the news are coming from because most people I know are laid off, endanger of being laid off, or just plain out of work? BTW nobody can live on $8 an hour.

    And finally “There are no jobs”!!!!

    Can you say Depression? Scary!

  4. yes, and with half the people working for the govt, directly or indirectly, or on pensions, that all get automatic cpi increases every year, that means the rest of us are going down at double the ‘average’ declines

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