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Chris Martenson

Image | A Cure Worse Than The Disease
A Cure Worse Than The Disease
 PREVIEW

Recently I’ve argued that Deflation is Not on the Menu by pointing out that the immediate and devastating political and economic pain associated with deflation will spur decision-makers to do anything and everything within their power to stoke inflation.

And then, when discussing the Greek situation, I noted that there are only three possible actions for EU leadership to take: 

  1. Let Greece fail
  2. Let French and German banks fail
  3. Fire up the QE particle accelerator, buy up all those dodgy Greek (and Spanish and Portuguese and…) bonds, and stuff them onto the ECB balance sheet like the Fed did with MBS paper

Providing no surprise to me at all, they chose option #3 this weekend and fired up the magic money machine to the tune of nearly a cool trillion:

A Cure Worse Than The Disease
 PREVIEW

Recently I’ve argued that Deflation is Not on the Menu by pointing out that the immediate and devastating political and economic pain associated with deflation will spur decision-makers to do anything and everything within their power to stoke inflation.

And then, when discussing the Greek situation, I noted that there are only three possible actions for EU leadership to take: 

  1. Let Greece fail
  2. Let French and German banks fail
  3. Fire up the QE particle accelerator, buy up all those dodgy Greek (and Spanish and Portuguese and…) bonds, and stuff them onto the ECB balance sheet like the Fed did with MBS paper

Providing no surprise to me at all, they chose option #3 this weekend and fired up the magic money machine to the tune of nearly a cool trillion:

Image | Market Not Buying The Fat-Fingered Excuse
Market Not Buying The Fat-Fingered Excuse
 PREVIEW

Well, it’s another day with another bout of exceptional volatility.

As I type this, the S&P 500 is down -23 points, the Dow is off by -240, no -183, no-210, no -91….oh never mind.  Let’s just watch while sitting on our trading thumbs.

Meanwhile, gold is stubbornly hanging around the $1200 mark and the news out of Europe is awful.

This is the news that makes me the most worried:
Market Not Buying The Fat-Fingered Excuse
 PREVIEW

Well, it’s another day with another bout of exceptional volatility.

As I type this, the S&P 500 is down -23 points, the Dow is off by -240, no -183, no-210, no -91….oh never mind.  Let’s just watch while sitting on our trading thumbs.

Meanwhile, gold is stubbornly hanging around the $1200 mark and the news out of Europe is awful.

This is the news that makes me the most worried:
Image | Full-Blown Panic
Full-Blown Panic
 PREVIEW

Ouch!!  Look at the markets!!!

And I don’t normally use exclamation points.

Gold is back over $1200 and the stock market is undergoing a full-blown rout, with the S&P down more than 60 at present.

I’m quickly trying to analyze what this means and what’s happening, but wanted to open this thread up for immediate discussion.

Ooops.  The S&P is now down more than -72.  Make that -78.  No, -96!!!!  Yikes!

This is one of the biggest one-day moves in my experience.

 
Full-Blown Panic
 PREVIEW

Ouch!!  Look at the markets!!!

And I don’t normally use exclamation points.

Gold is back over $1200 and the stock market is undergoing a full-blown rout, with the S&P down more than 60 at present.

I’m quickly trying to analyze what this means and what’s happening, but wanted to open this thread up for immediate discussion.

Ooops.  The S&P is now down more than -72.  Make that -78.  No, -96!!!!  Yikes!

This is one of the biggest one-day moves in my experience.

 
Image | Power Outage: Lessons Learned
Power Outage: Lessons Learned

On Tuesday afternoon (5/4/2010), while I was engaged in my weekly biology class with a group of homeschoolers, the wind suddenly kicked up out of nowhere with a single strong gust.  Looking out the window, all eight of us were struck by what looked like a yellow cloud lifting up over the nearest ridge about a mile away.

It wasn’t a yellow cloud; it was soil, lifted violently from the fields in the valley below, its color highlighted by the dark clouds above.  Suddenly, the tree tops on the ridge to our west all bent over in unison, as if brushed by a giant invisible hand.  There was a pause, and then we got hit with a blast of gritty air, probably in the vicinity of 50 mph, that toppled trees in our yard and turned out the lights.  Boom.  Just like that.  We had about 2 minutes to react and prepare, from start to finish.
Power Outage: Lessons Learned

On Tuesday afternoon (5/4/2010), while I was engaged in my weekly biology class with a group of homeschoolers, the wind suddenly kicked up out of nowhere with a single strong gust.  Looking out the window, all eight of us were struck by what looked like a yellow cloud lifting up over the nearest ridge about a mile away.

It wasn’t a yellow cloud; it was soil, lifted violently from the fields in the valley below, its color highlighted by the dark clouds above.  Suddenly, the tree tops on the ridge to our west all bent over in unison, as if brushed by a giant invisible hand.  There was a pause, and then we got hit with a blast of gritty air, probably in the vicinity of 50 mph, that toppled trees in our yard and turned out the lights.  Boom.  Just like that.  We had about 2 minutes to react and prepare, from start to finish.
Image | Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil
Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.

By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.

By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

Image | “What Shall We Buy Today?” – Everything!
“What Shall We Buy Today?” – Everything!
 PREVIEW

Once again, we find that a moment of market reality is met with an astonishing wall of liquidity, as evidenced by the past two days of gains in, well, everything.  I’ve seen this particular behavior more than a few times over the past eight years, and I’m pretty confident that I know what it is and where it originates.

On Tuesday, the market reality was the sudden realization that instead of everything getting unequivocally better, there was solid evidence of rot in the debt superstructure of much of Europe, concentrated (for the moment) in southern Europe

Well, wouldn’t you know it.  That realization only lasted a single day, as stock futures were mysteriously repaired that night, bonds remained well above their pre-mini-crisis levels, and commodities came roaring back.

One might be tempted to ask, “How is it possible that such a crisis can only last for a single trading day?”

“What Shall We Buy Today?” – Everything!
 PREVIEW

Once again, we find that a moment of market reality is met with an astonishing wall of liquidity, as evidenced by the past two days of gains in, well, everything.  I’ve seen this particular behavior more than a few times over the past eight years, and I’m pretty confident that I know what it is and where it originates.

On Tuesday, the market reality was the sudden realization that instead of everything getting unequivocally better, there was solid evidence of rot in the debt superstructure of much of Europe, concentrated (for the moment) in southern Europe

Well, wouldn’t you know it.  That realization only lasted a single day, as stock futures were mysteriously repaired that night, bonds remained well above their pre-mini-crisis levels, and commodities came roaring back.

One might be tempted to ask, “How is it possible that such a crisis can only last for a single trading day?”

Image | Major Market Move – 4/27/10
Major Market Move – 4/27/10
 PREVIEW

As I write this, the Dow is down 170 points and the S&P 500 is down 23.  The dollar is up 0.89 (a big move), and (here’s the surprising note in this symphony) gold is up $8.

The explanation being trotted out by the media for this big move is the fact that S&P (the rating company) downgraded Greece and Portugal’s debt.

NEW YORK (MarketWatch) — U.S. stocks caved on Tuesday after Standard & Poor’s cut its rating on Greece. “If followed by Moody’s, Greek bonds will no longer be able to be used as collateral in borrowing from the European Central Bank,” said Peter Boockvar, equity strategist at Miller Tabak. The Dow Jones Industrial Average

(Source)

I rather doubt this explanation.

Major Market Move – 4/27/10
 PREVIEW

As I write this, the Dow is down 170 points and the S&P 500 is down 23.  The dollar is up 0.89 (a big move), and (here’s the surprising note in this symphony) gold is up $8.

The explanation being trotted out by the media for this big move is the fact that S&P (the rating company) downgraded Greece and Portugal’s debt.

NEW YORK (MarketWatch) — U.S. stocks caved on Tuesday after Standard & Poor’s cut its rating on Greece. “If followed by Moody’s, Greek bonds will no longer be able to be used as collateral in borrowing from the European Central Bank,” said Peter Boockvar, equity strategist at Miller Tabak. The Dow Jones Industrial Average

(Source)

I rather doubt this explanation.

Image | Not Cheap, Not Easy: Getting the Last Oil Out
Not Cheap, Not Easy: Getting the Last Oil Out
 PREVIEW

Last September (2009), a spectacular oil find was trumpeted all over the news.  It was deep and it was audacious, but the technological prowess on display gave some people the ammunition they needed to continue to deny the reality of Peak Oil.  At the time, I received more than a few emails from individuals who used this find as proof that Peak Oil, even if it was real, was still far in the future.  Faith in technology was given a huge boost by this nature of this find.

I countered with my usual mantra of TIME, SCALE, & COST, arguing that there’s a gigantic gap between a brilliant technical demonstration and full-scale production.  I was quite skeptical of this particular find, because it was 35,000 feet under the surface, a full mile deeper than Mount Everest is tall.  I’ve used this specific example in every talk I’ve given since.

To jog your memory, here’s the original news article:

Not Cheap, Not Easy: Getting the Last Oil Out
 PREVIEW

Last September (2009), a spectacular oil find was trumpeted all over the news.  It was deep and it was audacious, but the technological prowess on display gave some people the ammunition they needed to continue to deny the reality of Peak Oil.  At the time, I received more than a few emails from individuals who used this find as proof that Peak Oil, even if it was real, was still far in the future.  Faith in technology was given a huge boost by this nature of this find.

I countered with my usual mantra of TIME, SCALE, & COST, arguing that there’s a gigantic gap between a brilliant technical demonstration and full-scale production.  I was quite skeptical of this particular find, because it was 35,000 feet under the surface, a full mile deeper than Mount Everest is tall.  I’ve used this specific example in every talk I’ve given since.

To jog your memory, here’s the original news article:

Image | Deflation Is Not On The Menu
Deflation Is Not On The Menu
 PREVIEW

Deflation Is Not On The Menu

April 19, 2010

Executive Summary

  • Why creating inflation is our official policy.
  • Deflation would destroy our economy, our financial system, our hopes, and our dreams.
  • For budgets and pensions to be repaired, we badly need a return of economic growth. Or inflation of our asset markets. Or both.
  • The flood of liquidity that we’ve been tracking is very real and is distorting prices for all financial assets.
  • This ‘recovery’ is a gift.  Use the time wisely. 

A constant debate rages over whether we will ultimately head down an inflationary path or get sucked into a deflationary whirlpool.  In fact, the most common question I am asked at my public talks is whether the future will consist of inflation or deflation.  So I thought we’d spend a bit more time on the subject here.

While I can’t tell you which will happen for certain, I can tell you that the inflationary path is infinitely preferred over deflation by our fiscal and monetary authorities.  Given their druthers, we’d most definitely head down a path of inflation.  While a renewed bout of deflation may be in our future, it is simply not among the acceptable range of policy options.
Deflation Is Not On The Menu
 PREVIEW

Deflation Is Not On The Menu

April 19, 2010

Executive Summary

  • Why creating inflation is our official policy.
  • Deflation would destroy our economy, our financial system, our hopes, and our dreams.
  • For budgets and pensions to be repaired, we badly need a return of economic growth. Or inflation of our asset markets. Or both.
  • The flood of liquidity that we’ve been tracking is very real and is distorting prices for all financial assets.
  • This ‘recovery’ is a gift.  Use the time wisely. 

A constant debate rages over whether we will ultimately head down an inflationary path or get sucked into a deflationary whirlpool.  In fact, the most common question I am asked at my public talks is whether the future will consist of inflation or deflation.  So I thought we’d spend a bit more time on the subject here.

While I can’t tell you which will happen for certain, I can tell you that the inflationary path is infinitely preferred over deflation by our fiscal and monetary authorities.  Given their druthers, we’d most definitely head down a path of inflation.  While a renewed bout of deflation may be in our future, it is simply not among the acceptable range of policy options.
Image | Irreconcilable Differences
Irreconcilable Differences

I may have to get a divorce from the news, as nothing adds up anymore.

For example, even as the stock market surges along, as one might expect at the tail end of trillions in stimulus and bailouts, and retail sales apparently roared ahead in March according to the Commerce Department, small businesses are as gloomy as they’ve ever been.

I really do have a difficult time trying to understand the source of the disconnect between these entirely divergent reports:

Irreconcilable Differences

I may have to get a divorce from the news, as nothing adds up anymore.

For example, even as the stock market surges along, as one might expect at the tail end of trillions in stimulus and bailouts, and retail sales apparently roared ahead in March according to the Commerce Department, small businesses are as gloomy as they’ve ever been.

I really do have a difficult time trying to understand the source of the disconnect between these entirely divergent reports:

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