Stocks fall, oil, gold, silver rise as Mideast unrest grows
Posted on 16 February 2011 with 4 comments from readers
In what may become the common theme of 2011 yesterday stocks fell while Brent Crude topped $104 and gold and silver headed back to their former highs of last year. The cause? More unrest in the Middle East.
Switch on the global news media and there is the ‘Day of Anger’ in Bahrain, opposition protests in Tehran, vocal protests in the streets of Yemen and who knows what is simmering from Algeria to Lebanon.
Iran erupts
Iran is the biggest worry with its 3.7 million barrels per day of oil production under threat. Global economic recovery focused in China and Germany is pushing up demand for black gold and any potential threat to supply pushes up the price.
But there seems no end in sight to the pandora’s box opened by the Egyptian revolution. The international media still insist on seeing this as a cry for democracy when this is really an explosion of anger over poverty, something far more difficult to alleviate than an absence of elections.
It is hard to see where this can possibly be leading except to more unrest and anarchy. That is a self-perpetuating downward cycle until somebody steps into the power vacuum. There are a few candidates for that role but nobody remotely credible as yet. Mob rule is a horrible prospect, especially for the mob.
Oil shock
However, high oil prices have a habit of derailing economic recoveries in the developed world. Let us not forget that the 2008 crisis came after $147 oil in July that year.
Is another oil shock about to hit the global economy? Is this the round two of the financial crisis, delayed but not prevented by central banks? Stocks certainly have begun to anticipate just that, and both gold and silver have gained strength as safe haven assets.
Worries by some silver investors that this precious metal would slip alongside stocks does not seem to be happening this time around, and that will continue to be the case as gold prices rise.
The ArabianMoney newsletter this month looks at defensive investment strategies for these troubled times, and comes up with some interesting ideas (click here).
4 Comments posted by readers:
Well said!
The operative sentence here, worth repeating:
The international media still insist on seeing this as a cry for democracy when this is really an explosion of anger over poverty, something far more difficult to alleviate
Sadly, global hunger and poverty will increase, while authoritarian governments and repressive regimes will continue to try to “contain” the situation, but the civil unrest will only accelerate.
It is amazing how few people remember the near revolution by African Americans during the 1960’s. They got fed up with being discriminated against. During the rioting in Chicago, the US Army, and police shot 45 people DEAD. Armored personnel carriers were driving down the streets. Soldiers were firing at snipers in windows with M-14 rifles and machine guns.
There was a sandbagged machine gun nest with a belt of bullets in it on the steps of the US Capitol building in Washington D.C. manned by some very mean looking soldiers ! (No amount of rioters will ever trash that place, unless they bring some tanks with them.)
When the Federal Government ordered integration of the public schools in Little Rock, Arkansas, some people shot at members of the 82nd Airborne Division. (not recommended.)
And yet, the US Government survived. Wrongs were eventually addressed.Those 1960’s in the USA were crazy times.
One more thing, Kyle Bass, the billionaire financial genius, was just on the noon CNBC show with David Faber saying that the entire world could be setting up for a financial meltdown in the next few years. He said (as I have written here), that there is WAY TOO MUCH DEBT OUT THERE. Even I can figure out that you can’t keep creating more and more debt forever. Eventually, the system MUST collapse, if you try to keep doing that! Bernanke is printing $2,300,000 a MINUTE. The entire interview is on the CNBC US TV site. I would STRONGLY suggest that all investors watch it. Kyle Bass made a huge fortune on the housing collapse. END OF PREACHING.
@ Bill, in Slidell or Near Slidell:
Don’t know where Slidell is! But I believe you have significantly under-estimated the extent of US money printing (including the digital type of money that the FED engages in) is way off; your estimate suggests that only a few billion are printed over a one year timeframe.
At the present time, the Bernank is digitally printing between $6 to $9 billion PER DAY and most of this is being used for the following reasons:
a) to help fund the $1.5 trillion budget deficit, since US Treasury bonds are not being purchased in large quantities any more, and
b) to “help” the big banks become solvent: billions each day are exchanged between the FED and these banks for worthless paper, so that these same banks can then gamble it in The Grand US Casino, also known as the US stock market.
I totally agree with your “preaching” commentary about “too much debt out there” . . . it’s in the tens of trillions, and these debts will never be paid back! If you add in the sovereign debts, it’s in the hundreds of trillions. Collapse is inevitable
P.S. I also lived through the 1960s and the unfortunate race riots at that time. Although I remember that there was violence and a small number of people were killed, I do not recall 45 people being killed in Chicago. I just googled “Race Riots in Chicago” because I was curious to find some details. According to 4 different sources (via Google), the worst race riots in Chicago (and the most deaths) occurred in 1918-1919. Here is the specific info from the Encyclopedia of Chicago; please note the 3 references in the bibliography.
http://encyclopedia.chicagohistory.org/pages/1032.html
@ Obewon
Hi obewon, Sorry about the Chicago mistake, and thanks for the correction. I meant to write Detroit, not Chicago. The old brain cells are going FAST!
Slidell is a small city (26,000) on the North shore of Lake Pontchartrain which borders New Orleans, Louisiana. It is near the NASA Stennis Space Center where nearly all US rocket engines are now tested before flight. I moved here after my home was flooded in Katrina from defective levees. I’m just outside of the city limit, but still in the developed area, a few hundred meters north of NOISY Interstate 12. This house is all brick with double glass windows, and I can still hear I-12 inside when the wind is blowing from the South and the TV is off, which it almost never is. You can visit the neighborhood on Google Earth by seeking out Clearwood Junior High. I can’t put my address on the Internet, but my neighbors like pools, and I have plenty of off-street parking spaces. (Less grass to cut.) The addresses are wrong on Google StreetView anyway, although you can read many of them with the new camera system they are now using. That thing is amazing. I just bought a 55 inch, 1080p TV so that I can travel from my sofa with a HDMI cable from the laptop. You wouldn’t believe how much you can blow up a digital photo taken with a good digital camera!
I heard some fellow on CNBC say that Ben is creating over about $2.5 million a MINUTE with the QE. He put the total debt out there at about $200TRILLION.
It will be interesting to see what happens with the $500 TRILLION of derivatives out there, if the Congress lets the US default on its’ debt in a couple of months. I can see a lot of those derivatives causing BIG problems, far worse than what happened after Lehman, should a default occur. But I could be wrong. We may soon find out. One day, I will give my ideas on how to reduce the debt. I would need a team of experts to know if they would actually have any chance of working. Probably not.
I always enjoy your comments. Take care. Bill.