More from Tyler Durden:
As the chart below shows, gasoline stocks rose 0.5 million bbls last week to 241Mm bbl and is now 11.8% higher than last year.
Source: Oil Crashes To $41 Handle After Surprise Inventory Build, Production Rise | Zero Hedge
Oil Crashes To $41…… | Zero Hedge
Tyler Durden suggests that crude oil prices will fall in the second half of 2016:
Tracking last year’s pump-and-dump of hope perfectly.
As demand is set to tumble…
Source: Oil Crashes To $41 Handle After Surprise Inventory Build, Production Rise | Zero Hedge
US rig count rises
The recent peak in crude prices coincides with the bottom for the US oil rig count (discussed Monday).
US Light Vehicle Sales disappointing
June US Light Vehicle Sales came in at a disappointing seasonally adjusted annual rate of 16.689 million vehicles. Light vehicle sales, an important barometer of consumer confidence, have been trending lower since November 2015. Further falls would be cause for concern.
The real problem: Private Investment
Want to know the real cause of low GDP growth? Look no further than Private Investment.
Private Investment ran with peaks around 10 percent of GDP and troughs around 4 percent throughout the 1960s, 70s and most of the 80s. Since then Private Investment has declined to the point that the latest peak is close to 4 percent.
It is highly unlikely that the US will be able to sustain GDP growth if the rate of investment continues to decline. GDP growth is a factor of population growth and productivity growth. Productivity growth is not primarily caused by people working harder but by working more efficiently, with better tools and equipment. Using an earthmover rather than a wheelbarrow and shovel for example. Falling investment means fewer new tools and efficiencies.
The second graph plots the annual increase in private debt against GDP. You would think that this figure would fall — in line with falling rates of investment. Quite the opposite. Private debt growth is rising. While annual debt growth is nowhere near the red flag of 5 percent of GDP, if it crosses above the rate of private investment — as in 2006 to 2009 — I would consider that a harbinger of another crash.
Michael Pettis: Brexit could speed breakup of the Euro
On secular stagnation: “I don’t see growth picking up until you either redistribute income downwards — which is politically quite difficult and slow — or developed countries which are credible borrowers engage in massive infrastructure spending — which would be a great idea but politically difficult — so I’m afraid secular stagnation is going to last several more years.”
On BREXIT: “I’m not to optimistic that the Euro will be around in 10 years…BREXIT could speed up the process if England does well.”
On future crises: “It’s always the same thing: a huge switch from New York to Washington (in American terms) where policy begins to dominate the whole process…because the solutions to the problems are political solutions, not really economic or financial solutions…”
Jim Jefferies – Gun Control | from BARE Netflix Special
Highly relevant in today’s political climate.
Turn the sound off if bad language offends you 😉
S&P 500: Expect strong resistance
The S&P 500 is testing resistance at 2100, while declining 13-week Twiggs Money Flow warns of medium-term selling pressure. Expect strong resistance between 2100 and 2130 but reversal below 2000 is now unlikely.
CBOE Volatility Index (VIX) at 15 indicates calm is restored after the last two turbulent weeks.
The rise of tyranny
From Andrew Sullivan in NYMag:
…..In Eric Hoffer’s classic 1951 tract, The True Believer, he sketches the dynamics of a genuine mass movement. He was thinking of the upheavals in Europe in the first half of the century, but the book remains sobering, especially now. Hoffer’s core insight was to locate the source of all truly mass movements in a collective sense of acute frustration. Not despair, or revolt, or resignation — but frustration simmering with rage. Mass movements, he notes (as did Tocqueville centuries before him), rarely arise when oppression or misery is at its worst (say, 2009); they tend to appear when the worst is behind us but the future seems not so much better (say, 2016). It is when a recovery finally gathers speed and some improvement is tangible but not yet widespread that the anger begins to rise. After the suffering of recession or unemployment, and despite hard work with stagnant or dwindling pay, the future stretches ahead with relief just out of reach. When those who helped create the last recession face no consequences but renewed fabulous wealth, the anger reaches a crescendo…..
Sullivan argues that Donald Trump is riding this populist backlash to the White House. I believe that the same populist forces are behind the BREXIT vote. This is a major threat to stability of the Western world over the next decade.
WWI: The biggest mistake in modern history | Niall Ferguson
Niall Ferguson argues that Britain’s decision to intervene in 1914 turned the conflict between Germany and Russia from a continental war into a global war.
https://youtu.be/bT81WwCix4M
Ferguson argues that the consequences of that decision by Britain in 1914 lasted 75 years, until collapse of the Soviet Union in 1989. With the benefit of hindsight, and the resurgence of Russia, I would say we still live with those consequences today.