What Market Monsters Giveth and Taketh Away…

The media hot air has all now been squeezed out of the North Korea (NoKo) summit in screeds of catastrophic column inches.

And now they need a new headline monster.

Enter Mr El-Erian, chief economic adviser at Allianz, who has proven quite adept in making monsters out of molehills.

To wit: "Look for markets to say, 'Great, that's a first, good constructive step with what happened in Singapore,'" Allianz's chief economic advisor said in a "Squawk Box" interview. "But we have other things on the radar screen that we're looking at right now."

Seriously?  Something just popped up on your radar screen? 

Let the vagaries, suppositions and premonitions begin.

As for the investor audience listening to the streams of this garbage every single day, these "experts" seem to feel it’s productive to run the listener from one failed thing to be afraid of to another, with no end in sight and no objective other than getting air time. 

After years of doing it over and over and over again you might think their consciences would finally get to them.

Eh, no.

And it costs the listener, because fearing everything that moves has never proven to be an effective investment strategy.

It also hides the healthier view of the world around us, a true understanding of how things have improved, and the thousands and thousands of points gained upward in the markets – the path to making real headway towards wealth-building goals. 

And our very best days are still ahead. 

Now that the massive AT&T deal has been approved, the one surprise may be that we see a quiet but steady pick-up in M&A activity stateside.  That beating the government case took is a sign that mergers are likely to be approved at a faster pace.  And if so, look for a new wave of productivity and cost efficiencies to be birthed.

Right on time too, as the US Federal Reserve and the investor audience begin to worry about – wait for it - inflation.

The reason we’ve seen inflation pop up a little bit in recent quarters is because crude oil has punched up into that price range we spoke of years ago. 

We noted in 2015 that the likely long-term range for crude was $40-$80 per barrel.  We further noted that the closer we got to $80, the larger the flood would become from the US on production. 

So, here it is:

And Now for a Couple of Highlights

The US has seven (7) major shale basins being developed.  As technology expands and capacity increases, look for more regions to become accessible.

More importantly, the US is now the largest producer of oil in the world, approaching 11MM bpd.

That’s interesting because even at current levels of roughly 3.2 million bpd, the Permian is already pumping out more than the producer nations of Kuwait, Nigeria and Mexico!

As this forecast above builds into reality over the next few years that basin alone, one of our seven current basins, is set to surpass output from Canada, China and Iraq.

Now, guess what happens if you flood markets with increasing supplies while the fringes of use categories continue to get eaten away by solar, electric, water, nuclear, fusion…?

Price rallies peak and then rollover again. 

And with that shift the alleged catastrophe of inflation and high oil prices disappears. 

And then we’ll be told the catastrophe is low oil prices and deflation, along with a rolling debt crisis in the oil fields (Part 6).

The monsters come and go, but the theme is always the same.

Be afraid, be very afraid…

…because fear makes for winning headlines.