Petroleum & Macro Economic Analysis

Oil, Capital Markets, and the "Banking Power War"

For those that have been paying any level of attention to the US domestic equity market mayhem that has been taking place for the past week, will realize that something is different about this one. Even different we dare say than the events surrounding the often referenced 2008 "mortgage meltdown". While we could go on about equities, derivatives, CDO's, and a myriad of other paper-concocted financial instruments, the one thing we need really pay attention to is commodities (and the pricing thereof). Or as we so often say the "real stuff" that underlies all the other capital market nonsense. Commodities, for lack of a more polite way of putting it, are in fact real things. Metals (both investible and industrial), oil, natural gas, amongst many others, are the fundamental foundation of any national or international economy. The "other stuff", most notably various paper investments are for the most part variations of speculations on the valuations of said commodities. In much the same way that equities or "stocks" are speculations on the future valuations and earnings of various corporate entities.

The real story, that is getting some major coverage on main stream networks finally, is about the valuations of commodities (specifically amongst them) crude oil. As traumatic as seeing various domestic capital market index numbers at absurd lows by standard can be, the real story is the 25 USD range for a barrel of crude oil. Firstly, using both expert analysis as well as Evolution 4.0, we analyze the why:

We can summarize the "why" in one word: Supply. Or more appropriately, oversupply. Based upon Evolution 4.0 analysis as well as a myriad of readily available studies, the demand for crude oil both as a transport fuel as well as vital component in manufacturing has not declined. We will say that again. Demand for oil, if anything has increased slightly, especially in developing became developed market nations such as China, India, and even some African nations. Anyone with even the most basic fundamental understanding of economics at that point will likely point to the fact that if demand has increased, then price should also increase. This is true. However, we once again point to "over supply" as the culprit for the current 25.00 BBL range for oil. In fact, we would like to preface the word "over supply" with the word "intentional". As in any commodity market where there is price valuation, as supply of a commodity increases, then there is the inverse relationship to pricing, whereupon pricing and valuation declines.

The next important question to ask relates to the "who"? The short answer would be the BRICS nations. (Those not familiar, feel free to google the BRICS nations). In addition to the five nations (Brazil, Russia, India, China, and South Africa) that comprise the BRICS acronym, there are over 100 other nations that are considered BRICS / AIIB (Asian International Infrastructure Bank) affiliated. The longer answer would be the BRICS nations, as well as both affiliated and non affiliated nations that have chosen to partner with the more economically pragmatic BRICS nations. The opposition to the BRICS nations (who tend to favor longer term, more economically stable banking practice), would be the "Anglo western" banking system. The latter is what most Americans know to be "the banking / financial services" industry in general. Based upon Evolution 4.0 analysis, the oversupply of oil, which has lead to the seemingly unheard of 25.00 BBL level is the direct result of Russian and Middle Eastern intentional over-supply (along with releasing various petroleum reserves). That is to say that previous price levels were maintained through the usage of an age old technique known as "intentional scarcity". In addition to working in the commodity markets (whereupon supply is restrained in order to create artificial value), the same technique is what gives non-asset backed currencies (such as the USD) value. The "artificial scarcity" of any commodity vis a vi under production is what creates increased demand (or the illusion thereof) and by default, increased price valuations. Essentially by both Russia and other oil producing nations unleashing reserves as well as maintaining current production levels (despite some reporting), they have driven the pricing of crude oil to levels previously unimaginable in the modern era of economics.

It should be noted, that another important "why" can be answered here. In the largely "invisible" economic war being fought (for the past two years) between the BRICS nations (favoring more proven economic practices such as metals backed / asset backed currencies), and the Anglo western banking system, oil has proven to be the Achilles heel of many western economies. As an example, Based upon Evolution 4.0 information, the oil sands / oil shale industry requires pricing of crude to be at or above the 72 dollar BBL mark to make their product (which requires more effort to extract), competitive in the global oil marketspace. 25.00 USD BBL creates two adverse effects for the oil shale market: One is an over supply of oil they would rather not sell at a loss, and two, means that production will eventually grind to a halt rendering local / regional economies severely damaged (as can be seen in Canada). Additionally, the glut of supply means that to maintain any sort of price valuation stability, Anglo western owned oil production, refinement, and supply operations must reduce production dramatically, once again having an adverse effect on local and regional economies.

To use a modern video-gamer colloquialism, the Chinese have discovered that it is possible to deliver a one time ultimate economic "head shot" to the Anglo western banking system vis a vi the pricing and valuation of crude oil. More specifically the Chinese banking system combined with Russia's ability to produce tremendous amounts of petroleum (along with unleashing existing reserves) and add it into the global commodities markets have created an over supply condition that very few economists could have ever forecasted. Additionally, Russian and Chinese existing relationships with middle eastern oil / gas producing nations have certainly added to the effectiveness of this strategy. The ripple effect will be seen through many levels of the "real" economy, from transports, manufacturing, and of course the financial services marketspaces. Most notably the latter for one very specific reason:

Our Evolution 4.0 "real time" research team recently had the opportunity to verify the fact that in some rural areas of the United States, 87 octane, unleaded gasoline is being sold for 1.70 per gallon. Those levels have not been seen since the last 1990's early 2000's (depending on geographic location). A side effect on the "real economy" is the very real "hyper-inflation / inflationary" effect of increased liquidity in domestic capital markets. How? Because of "price conditioning" (think 5.00 USD per gallon not too long ago), 1.70 USD appears to be quite the bargain by comparison. (Pricing perception). The 3.00+ USD that is not being spent on petroleum (in the form of gasoline in this instance), will find its way into other sectors of the economy, chief amongst which are savings and structured banking products. Our late college often talked about the notion of the Dow rising to 28,000 and based upon what we have seen, that is still in the cards. While this may seem unlikely after this weeks market route, the conditions are becoming more and more right for a purely currency / inflation fueled consumer spending / retail side capital market. More to the point, the "fools rally" prior to the "real implosion". In addition the circumstances whereupon the Federal Reserve can declare the need for either direct or ECB like indirect stimulus becomes more and more likely.

Finally we would be irresponsible if we did not mention that with oil valuations currently at previously unthinkable lows, the possibly for the speculative/derivative market on the anglo western side becomes also, more and more possible. We are presently researching what other asset classes (so far, many more than even we thought) could be effected by such a petroleum market derrative based implosion. What we will be forward in saying is that those who have been looking for a likey "first domino" in so far as a "demolition sequence" of the Anglo western economy need pay particular attention to oil (both as a commodity, and as a speculative tradeable).

In terms of summary: The need for the Fed to step in and unleash more (fiat) stimulus, combined with increased consumer spending / consumer confidence (low energy prices), timed with the potential metals backing of the Yuan (or consolidated BRICS / AIIB currency)+ flood of less desirable dollars back to the united states (cash and financial instruments) = dollar implosion. While we are speaking in very broad macro economic terms here, what we are invariably seeing is the Chinese (BRICS) nations making serious progress towards their global control of economics as we know them to be. In fact, what we have discovered through Evolution 4.0 information as well as in speaking with experts, is that the BRICS nations have figured out how to get the Anglo western nations to flood themselves with their own fiat currencies (leading to dramatic devaluation both in the US and in Europe) in response to the lower energy / oil prices.

Evolution 4.0 information indicates:

Look for oil prices to continue to plummet as Russia (along with affiliated / partner nations) continue to dump oil into the global commodity marketspaces through production (and reserve releases).

Consumer spending / discretionary spending / consumer confidence likely to get a major boost from lower "real economy" energy prices. Look for lower energy prices to help clear the inventory overage in the consumer vehicle marketspace. Specifically, domestic light truck and SUV sales inevitably will increase based upon continued easy financing and low(er) fuel prices.

Because of the volatility associated with major market shifts (such as we have been seeing), look for precious metals to surge in spot price valuation dramatically in the next two quarters. Based upon our analysis the upward surge in metals will be dramatically accelerated as the Chinese announce their intention to metals back the Yuan "sooner" rather than "later". As we have stated before, 2016 is the year many metals investors get to say "told ya so" many, many times. As talk of a metals backed Asian / Eurasian trade zone currency becomes more main stream, expect metals spot valuations to react accordingly.

Those interested in airline and travel/vacation related speculation trades: Look for a short term boost for the travel/casino/vacation marketspace predicated upon increased disposable income vis a vi trading profits as well as low/lower energy prices. (Lower energy prices translating into deeper discounts on travel packages as well as increased spendable income on the consumer side for travel).

Beginning Feb of 2016, look for fed language suggesting the possibility of a reversal of the 25bp rate hike and / or the requirement for "additional economic stimulus" as a reaction to the Chinese "Reichstag fire" style economic moves. The stimulus would come right before an additional flood of liquidity would return vis a vi less desirable dollars / dollar de-leveraging. Ergo: the catalyst for the initial stages of inflation leading to hyperinflation.

As more main stream news outlets continue to speak about "what if's" regarding Global Economic Reset level events (and as events of civil unrest continue), stocks such as Olin (manufactures of Winchester brand ammunition) and Strum Ruger will continue to outperform their respective indexes.

Please note that these are all signs of something we have come to call the "age of Caligula" effect prior to the implosion of an empire. We will be sharing additional information in so far as economic analysis as soon as we complete some in-house research that we have been working on. Suffice to say that a disproportionately large amount of Evolution 4.0 information that we have been seeing has indicated that the Q3/Q4 2017 estimated “full Global Economic Reset” is chronologically correct. The research we are presently conducting is effectively figuring out what the “new” system of economics will look like, specifically purchasing power, valuation of metals, currency consolidations, etc.