is oil the FIFTH currency?

[dummass]

Re: is oil the FIFTH currency?

Mel Gibson, in the Road Warrior, had an economy based on gasoline. As usual, someone had the idea first. What was the genre? 1970s or 1980s?

[sadsack]

Re: is oil the FIFTH currency?

Mel Gibson, in the Road Warrior, had an economy based on gasoline. As usual, someone had the idea first. What was the genre? 1970s or 1980s?

The franchise began with "Mad Max" in 1979 (shortly after the USSR invasion of Afghanistan), with "The Road Warrior" hot on its heels in 1981. IIRC, this was during the tail end of the second oil embargo (1979 Iranian revolution) and just before Volker throttled stagflation, etc. . . .

Recall that gold peaked in inflation-adjusted terms right around this time as well . . .

[metalman]

Re: is oil the FIFTH currency?

isn't that what this means?

The commodity markets are pricing in inflation that is expected to result via cost-push inflation from a weak dollar. The weak dollar is expected to result from aggressive monetary and fiscal policy. We additionally expect inflation starting in Q3 2009 to result from the combination of inflationary factors we identified last year, including the out-sized impact of a credit crunch on goods supply versus goods demand (supply crash). Investors who exited FIRE Economy assets in 2008 are buying commodities to hedge these inflation risks. In this way, the collapse of the FIRE Economy has an inflationary impact on goods and services prices in the Producer/Consumer Economy.

After a period of nine months to a year, the purchase of commodities as an inflation hedge becomes itself inflationary, as we saw in mid 2008. Prices of food and other items that are most directly impacted by energy as in input cost will rise first.

FIRE Economy Fallout -- Part II: Theme Change - Eric Janszen

[jk]

Re: is oil the FIFTH currency?

isn't that what this means?

yes, that passage is about the same question. i wanted to pull out that particular issue for more discussion. certainly, there are people holding oil as an inflation hedge, people buying distant futures for the same purpose, and then people selling distant futures while holding physical oil to cash in on the contango. otoh, i still think the markets have another leg down coming, and that they will pull down commodities as well. gold has been increasingly resistant to the gravitational tug of equity sell-offs, likely because it is in the hands of true believers in an inflationary outcome. i'm trying to get at the question of whether oil will sell off substantially, with equities [in this scenario], or whether- like gold- it will hold its price fairly well because of monetary - i.e. store of value - holders. opinions? evidence?

[LargoWinch]

Re: is oil the FIFTH currency?

i'm trying to get at the question of whether oil will sell off substantially, with equities [in this scenario], or whether- like gold- it will hold its price fairly well because of monetary - i.e. store of value - holders. opinions? evidence?

jk, I think Oil and Oil-related equities will retest their Dec. 08 lows based on EJ's latest analysis, Sprott's recent commentary and the latest Rosenberg's note.

I also think it will be the last opportunity to buy before POOM. Thats my gut feeling anyway.

[GRG55]

Re: is oil the FIFTH currency?

yes, that passage is about the same question. i wanted to pull out that particular issue for more discussion. certainly, there are people holding oil as an inflation hedge, people buying distant futures for the same purpose, and then people selling distant futures while holding physical oil to cash in on the contango. otoh, i still think the markets have another leg down coming, and that they will pull down commodities as well. gold has been increasingly resistant to the gravitational tug of equity sell-offs, likely because it is in the hands of true believers in an inflationary outcome. i'm trying to get at the question of whether oil will sell off substantially, with equities [in this scenario], or whether- like gold- it will hold its price fairly well because of monetary - i.e. store of value - holders. opinions? evidence?

Most of the higher quality petroleum producers I follow have roughly doubled from the Nov lows. If the market corrects I would expect they will too.

As for the commodity itself, I'll fall back on my long standing refrain...in the short run I have no idea what oil prices will do [and neither does anybody else]...but it's hard to see how oil holds its present range $60-$70 in another "risk-aversion" dominated market rotation [if that happens].

Thinking about it for a moment wouldn't another risk-aversion period be beneficial for the US Treasury, given it's heavy funding requirements, and the potential for another temporary reduction of input costs [commodities of all sorts] that would bring for the struggling US economy?

[jk]

Re: is oil the FIFTH currency?

Most of the higher quality petroleum producers I follow have roughly doubled from the Nov lows. If the market corrects I would expect they will too.

As for the commodity itself, I'll fall back on my long standing refrain...in the short run I have no idea what oil prices will do [and neither does anybody else]...but it's hard to see how oil holds its present range $60-$70 in another "risk-aversion" dominated market rotation [if that happens].

Thinking about it for a moment wouldn't another risk-aversion period be beneficial for the US Treasury, given it's heavy funding requirements, and the potential for another temporary reduction of input costs [commodities of all sorts] that would bring for the struggling US economy?

yes, if there's another movement away from risk, i expect we'll see what bill fleckenstein has called a "flight to quantity"- i.e. treasuries and the dollar. but at some point that reflex has to extinguish, no?