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Oil will first go down next 12 months. It will eventually go up, but that will depend on how fast SA will collapse. It may take several years.

Why am I saying this ? We are about to enter a very sharp recession. Have you noticed that some big companies worldwide started issuing profit warning last week ? (Lexmark, Aker Yards, but also some in Paper, in Aluminum, strange in a time of record commodities price, huh ? not to mention home improvement & construction companies in the US an UK ...)

"demand on debt steroids" is about to shut off real quick when the rates go up.

And we now stand at one hedge fund bankruptcy every week (200 m$ caliber). TSHTF pretty soon.

http://www.romandie.com/infos/news2/200707061532000AWPCH.asp
http://www.latimes.com/business/investing/la-fi-wrap6.2jul06,1,3993332.story?coll=la-headlines-busin ess-invest

Pierre

by Pierre on Mon Jul 9th, 2007 at 11:50:29 AM EST
[ Parent ]
As far as I am informed, Aker Yards issued that profit warning not because they had run out of orders, their order book is swelling, but because they had muddled up their logistics system, or something like that.

A few weeks ago I wrote that I wouldn't worry about a recession until at least two of three things happened.

  1. Much higher oil price.

  2. Much higher interest rates.

  3. Total chaos in the US housing market (and the subprime mortages stuff).

Only no. 1 has of yet happened, so I'm sitting tight.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Jul 9th, 2007 at 11:55:51 AM EST
[ Parent ]
In my view, 3 has happened and is bleeding into the UK housing market (real "deep" UK, that is, not including the City of London).

And 2 is shaping quickly.

Pierre

by Pierre on Mon Jul 9th, 2007 at 12:02:11 PM EST
[ Parent ]
Speaking of no.3...
NEW YORK (CNNMoney.com) -- More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.

[...]

"In October alone more than $50 billion in ARMs will reset," according to Mark Zandi, chief economist and co-founder of Moody's Economy.com. That's a record, according to Zandi.

[...]

As a result, Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), is expecting as many as 600,000 home owners will get into trouble with perhaps half of them actually losing their homes.



Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Jul 9th, 2007 at 03:08:16 PM EST
[ Parent ]
The UK bond yield curve looks scary (according to the conventional wisdom that an inverted yield curve forecasts a recession).

The US looks set for a rough 3 years, while Japan and Germany look more healthy.

Can the last politician to go out the revolving door please turn the lights off?

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2007 at 05:05:58 PM EST
[ Parent ]
Yes, I've seen this a few weeks ago, they seem set for a meltdown like we haven't seen in ages. Hope you have an open return (escape ?) ticket Mig, 'cos Sarko will wall off the chunnel when the refugees start milling.

I'm not sure why the BoE raised the rates so steeply. Is it to fend off imported inflation, pumping the Sterling in the face of the foreign account deficit that is developing with the North Sea cliff ? They had to know that'd prick the bubble

Pierre

by Pierre on Mon Jul 9th, 2007 at 05:20:30 PM EST
[ Parent ]
Apparently the UK bond yield curve has been inverted for at least 3 years, but the slope keeps getting steeper.

Can the last politician to go out the revolving door please turn the lights off?
by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2007 at 05:22:26 PM EST
[ Parent ]
I pretty much agree. I'll be dumping my oil related stocks before the year is over, but likely picking them back up within 18 months even if the predicted recession hasn't ended by then.

you are the media you consume.

by MillMan (millguy at gmail) on Mon Jul 9th, 2007 at 04:06:10 PM EST
[ Parent ]

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