After a drop of more than 20% from late April to mid June in wholesale gasoline prices which was heralded as the great savior of a slowing global economy – all those implicit tax cuts… the hopes and dreams of the next great unsterilized money-printing has not only floated equity asset valuations to near multi-year highs but energy prices across Europe and the US are soaring once again. This ‘transitory’ 25% surge in wholesale gasoline prices in the US in the last two months – now back above $3/gallon implies (given the lag in transmission) that retail gas prices (which historically peak around July 4th) are set to rise notably above last year’s summer peak – back up near record highs and eating into that ever so happy to spend consumer’s pocketbook once again. Meanwhile, Europeans are seeing near-record highs in retail gas prices once again andBrent priced in EUR (which remember is what they ‘care’ about) is now back above 2008 highs and within a few euros of all-time record highs – up almost 30% since Mid-June. Deflationary? Recessionary?
US Crude, Wholesale Gasoline, and Retail Gas Prices are charging higher…
Today 40 year veteran, Robert Fitzwilson, wrote the following piece exclusively for King World News. Fitzwilson, who is founder of The Portola Group, put together a fascinating piece which takes covers everything from Art Cashin, the 70s, and what the smart money is doing right now. Below is Fitzwilson’s piece.
“The great Art Cashin once said that he was counseled as a young man “not to plan for the end of the world as it is a one-off event”. As we try to divine our investment future, it is helpful to keep that sage advice in mind.
When I started my career in the early ‘70s, my singular goal was to graduate from a certain business school. It was the crowning achievement of my young life. Graduating in 1973, I took a job with an investment firm, eager to learn the business. Unfortunately, I parachuted right into one of the worst bear markets in history. It was so bad that we were forced to retreat to libraries to read books about how to invest.
The answer, though, was simple. Everything was going down. It did not matter what theory one employed. The Dow Jones had peaked in January of 1973 at 1067, and dropped like a stone to finally bottom out at 570 at the end of 1974. Needless to say, my eagerness and budding love of the business was greatly diminished.
I thought it was cruel that I had achieved the crowning achievement of my young life only to find out that the world was going to end. This was the age of the long gas lines. To even get gas, one had to have a friend who knew a friend. You then had to get in line, usually when nobody was looking….
Anyone betting that the global financial system will continue to muddle along indefinitely deserves to reap the whirlwind that’s coming. As the rest of us well know, the international banking system is being kept afloat solely by political lies, stupidity, corruption, greed and, most of all, egregiously misplaced confidence. It would seem to be only a matter of time before the rotted timbers of this belief system give way. But what will be the catalyst? The possibility or even likelihood that the financial system will be toppled by some event no one was expecting was an implicit theme of Nassim Taleb’s widely read 2004 book, Fooled by Randomness. In the New York Times, Taleb asserted the following: What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
Or it could be actually worse than anyone, as usual, wishes that poop can be turned into gold well, still smells like and looks like poop. S&P has acted and for anyone who thinks that the Greek situation is “under control” or that the nation has been saved. Because it is game over soon.
– Following delays in implementing budgetary consolidation measures and a worsening Greek economy, we believe Greece is likely to require additional financing for 2012 under the EU/International Monetary Fund (IMF) program (EU/IMF Program).
– We consider the Greek government will find it difficult to make further cuts to meet the conditions to secure the next disbursement of the next tranche of funding from the EU/IMF Program.
– We are revising the outlook on the long-term ratings on Greece to negative, reflecting the possibility of a downgrade if Greece fails to secure the next disbursement of the EU/IMF Program.
Previously we showed that when it comes to Wall Street’s returns, the 8% market return benchmark that every first year analyst finds in Ibbotson’s is for naive amateurs. With corporate lobbying returning anywhere between 5,900% and 77,500%, the real money is to be made in the buying and selling of politicians. Yet in our day and age, when information propagates rapidly and when political muppets can be exposed for the Wall Street purchased frauds they are, lobbying is getting increasingly more complicated. Which leaves one other high returning “investment“, which unlike lobbying is completely riskless when one is a Wall Street firm: crime. But not just any crime, the type of crime where a firm settles “without admitting or denying guilt” and in the process is slapped with a fine that barely covers the government’s legal fees. Case in point: U.S. v. Morgan Stanley, U.S. District Court, Southern District of New York Case#11-6875, where MS was punished with the epic disgorgement penalty of $4.8 million. Of course, the fact that Morgan Stanley, who did not admit wrongdoing, generated profits of$21.6 million, is merely a triviality. But a useful one: it allows to calculate that on Wall Street crime does pay, and the IRR is in give or take 350%.
Breakaway Consciousness 