QUESTION: Thank you for the interesting update on crude and natural gas. Since February was a reversal and March was a turning point, the cycle inversion for the March high, rather than the low, still looks choppy without a breakout. With demand for electric vehicles peaking, the Fed appears determined to bring inflation down to 2% if it kills the global economy, then the supply cuts won’t lead to expected price increases. Can you explain this paradox?
Thank you
joint venture
REPLY: Yes, the reversal of oil direction in February warned that we would go up rather than down. Ukraine appears to be losing, so the bigger question may be how the United States will deal with another loss – Vietnam, Afghanistan and Iraq, where the elimination of Saddam led to religious wars. Note that the Fed started raising rates as soon as Russia invaded to protect the Donbass. Despite claiming it was due to inflation, the Fed knows only too well that inflation rises with war. They acted when Russia made its move, realizing that this proxy war would accelerate inflation.
Crude oil plummeted when Biden seized power as the general public believed he would do away with fossil fuels as that is what he said during his campaign. However, it soon became apparent that he was putting the cart before the horse, and the scarcity he set in motion sent prices skyrocketing, but that was part of the whole lockdown nonsense. The lockdowns led to a massive price spike in the shortage just because everyone was artificially kept in home confinement.
After March 2022, we have the Fed raising interest rates and the economy is making a real peak in a democracy with the tightest COVID restrictions, so this time we have a deficit with economic activity down. The COVID lockdowns have significantly changed the economy, with many working virtually from home. Office space vacancies in New York have exceeded 15% and continue to grow. Many shops are still boarded up.
The paradox is that before we all were in prison. So we ran out and tried to do everything we weren’t allowed to do before. After March 2022, we have a deteriorating economic situation, so we have reduced demand combined with reduced supply. For now, the 2020 low should hold and we should enter a bull market in 2033. However, I expect the trend to become more resilient with the war when we also have a panic cycle in 2025.
Temporary goals never change. What happens, whether it is a maximum or a minimum, is always subject to interpretation prior to the events. However, the time is set.