Something is dangerously wrong in a world where the price of crude oil can drop 5.6% in a single session, as it did last night in New York. My short idea on crude oil three days ago and the dissection of the Dubai property cycle was savaged by critics who assured me that I did not understand that Saudi Arabia’s command is Biden’s demand and that the laws of economics, let alone gravity have been repealed in the thrice resurrected Palm Jebel Ali. This may well be true as my IQ is more Densa than Mensa but the proof of the pudding lies in the tasting and God knows that the only taste/verdict that matters is price action.
So my friends who have forgotten the ghastly 70%+ fall in crude oil prices in Jul-Dec 2008 and June 2014 to Feb 2016 or the endgame of the last speculative, parabolic rise in property/off-plan tulips should be immediately awarded an MBA or Masters (and Mistress?) of Bubbleology and Amnesia. There are some traumas that the human brain has evolved since the dawn of time to forget before it can heal and greed, stupidity and high octane leverage are intrinsic to the human condition.
It may be the reggae music that is the spiritual soundtrack of my life but Rasta Matt has no positive vibrations about the global credit cycle and has no intention of jammin till the jam is through as Bob Marley is with the Lord Jah on Mount Zion, the high times and dreadlocks at Penn happened in a galaxy long long time ago and General Darth Vader and his Undertaker/caretaker PM rules the country my great grand uncle founded 76 years ago while the former captain of Sussex is the new Lord Voldemort, He-Who-Must-Not-Be-Named.
We were assured by the Sultans of Swing that Brent was headed to 100 but it is now 86.3 and the short call makes Densa laugh all the way to the bank unless Putin destroys the trade tonight by lobbying nukes on Kiev and engineers history’s biggest short squeeze in black gold. The omens are unmistakable now. Gasoline demand has plunged to its lowest level in 25 years. Inventories are building up in the Cushing storage hub for WTI. China’s diesel demand is in the pits. The spot grapevine in Rotterdam is positioned for a glut. The job market is cooling. The Fed’s interest rate shock has injected HIV into the bloodstream of the credit market and this makes the fall in junk bond spreads another datapoint that vindicates my call – Chart HYG’s price action in the past week.
Oil has tanked $10 even though Riyadh and Moscow announced that their output cut will continue as a New Year present for the global economy. It is not about supply any longer bro. The fit has hit the shan and demand destruction is now Wall Street’s new Baba Yaga, witch of the dark forest. I am backward but I’m damned if I did not grasp the message of backwardation in Brent futures spreads flash to me last week and hence I warned my friends in Dubai that oil was set to plunge, which is exactly what is happening in real time.
Could you be loved? Don’t let them fool ya…
Also published on Medium.
