I just sent this email message to several friends and family members:
This is Sunday night, which is Monday morning in east Asia, so I tuned in to the Bloomberg channel to check how the markets are opening there.The major asian equity indexes are down about 2-3%. Same in India, where the market has just opened. U.S. markets won't open for another 10 hours, but the futures on the DOW, NASDAQ etc are down about 2%.WHY? Apparently because the price of Brent crude oil on international markets just increased 25% from what it was Friday night.
On Friday, when the U.S. stock markets closed for the weekend, analysts and talking heads were gravely concerned about the fast rise of Brent crude to $90. Now it's hovering around $115 - a 25% increase in one trading day.That will trickle through to automotive gas slowly, but more importantly it will put a severe brake on the economies of the world. The U.S. is a net exporter of crude, so it will affect us more slowly. But the world economy is going to take a hit. And how much higher the price of crude will go depends on how long the strait of Hormuz is blocked. Some countries are probably already starting to draw down on their strategic reserves.Iran's closure of the strait is going to put MAJOR major pressure on the U.S. to cease the war, because the longer it goes on, the more that oil price will rise. And almost every country in the world suffers when the world economy slows down.The alternative would be for the US to do some invasion to end the war with a "quick victory" - but by doing what??? boots on the ground in a huge country?? Impossible to anyone other than Trump and Hegseth.My prediction: the US backs off in less than a week, declares "victory" (cf Vietnam), and achieves..... nothing but hatred around the world.
I didn't advise my family or friends what to do with their money, nor will I make suggestios for readers (it's obvious what you/we should have done Friday). I think it's reasonable to expect severe downward pressure on U.S. equities at the open tomorrow morning. After that, equity and commodity prices will fluctuate with Trump and Netanyahu's war.
"it's obvious what you/we should have done Friday" - Nothing. Unless you have a working crystal ball, second-guessing the market is a fool's game. Now, if you have spare cash, it's probably a buying opportunity but even then you don't know if it'll go lower.
ReplyDeleteIt's obvious to me that what I should have done on Friday was lighten my equity holdings and purchase some put options on the S&P500, but as you say I had no crystal ball. I actually did have some puts on IWM that expired at the end of the calendar month on Friday, and then Trump launches his war after the markets close. Had I gotten mid-March puts I could have multiplied my funds. The problem with options is that you need to be correct on both direction and timing and I was only half right, so I lost.
DeleteThe response of the markets this morning is more muted that I had expected last night, because Brent is now only at 100 instead of 115ish. I think there is a fundamental disagreement between geopolitical analysts and business investors. The latter think there will be a quick end to the gulf crisis, so they are already "buying the dip." Geopolitical analysts are echoing this morning that this crisis could last weeks, which could be catastrophic. Some leaders in Iran know this. If they can stay alive, they can drag this out to the detriment of Western economies.
I still don't understand why the pump price for gasoline that was refined weeks or months ago now suddenly goes up, even though the refinery has not touched any $140BBL product. war-profiteering?
ReplyDeletep.s. local gas prices have gone up by 45c since the war started!
I don't consider it "war profiteering." Companies have to do their pricing based on replacement costs of supplies, not on margin of past purchases.
DeleteIf you want to follow the war from multiple media sources, all on one web page: https://www.worldmonitor.app/
ReplyDeletep.s. it is very resource hungry, so a fast laptop / internet will help.
VERY interesting website that I was totally unaware of. And the further down I scroll, the more I find. Will take some time to learn to navigate. Nice to have a live feed to Aljazeera. Thank you so much, anonymous person.
DeleteTACO
ReplyDeleteIt's funny, Brent Crude, in that the Brent field is all but dry, but what's in a name...
ReplyDelete