The Smell of Fear
He played on our fears. He took America on an ill-conceived spending adventure dangerous to our future, an adventure preordained and planned before the financial crisis ever took place." Oops, sorry! I have to give credit where credit is due, that was Al Gore’s ranting about President Bush and Iraq. Of course, when I hear words like "catastrophe" and "Armageddon" I do think President Obama is playing on our fears.
Listen, things are bad and we do need some help but by trying to say that if we don’t include $100 million to teach kids about green energy construction that somehow the economic world will end is a pretty far stretch. Heck, the American people are talking about a significant investment here that Senator Harry Reid says could reach a trillion dollars. I think that we should wonder if all of that money was spent wisely.
What we do know is that government spending alone cannot lift the economy out of its funk. I am concerned that the stimulus’s positive effects might be offset by tax increases that are coming in the future. When the Bush tax cuts expire, it will be another burden on the struggling economy and will be an issue that may slow the recovery just as it is getting started.
Still, oil loves the stimulus talk. Once again oil was brought out of the hole by talk of the stimulus and talk of more OPEC production cuts. Bloomberg News reported that Saudi Aramco, the world’s largest state oil company, would reduce crude supplies to Japan in March for a fourth month. That comes as oil supplies are rising and demand falling. David Bird of Dow Jones writes, “Rising inventories are a further blow to OPEC, which is reeling from the fall in global oil demand and prices.” Each barrel of oil that goes into storage in consumer countries weakens the cartel's hold on the market and potentially prolongs the price skid. OPEC pledged to cut output by 4.2 million barrels per day in September. Since then, the group has cut production by a total 3.135 million barrels a day, indicating a compliance rate of 75%, a survey by Dow Jones Newswires estimates. Saudi Arabia, the world's biggest oil exporter and OPEC member, cut output below its agreed level of 8.05 million barrels a day in January. Saudi output of 7.9 million barrels a day was the lowest since October 2002. Now, analysts said, the plunge, alongside oil's inability to recover, will require deeper cuts by Saudi Arabia and OPEC to prop up the market. But how much more can they cut they need the money and while cutting production may be supporting prices now, with winter almost over, it is unclear that OPEC can cut enough to stop another oil price market crash.
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We are still short oil and riding down the biggest break in oil history!
We're short March crude from approximately 4354 on what is a quadruple rollover! Lower stop to 5050
Sell March heating oil at 14700 - stop 15600
Sell March RBOB at 13300 - stop 13900
Sell March natural gas at 500 - stop 540
Phil Flynn is vice president of Alaron Trading and a Fox Business Network contributor. He can be reached at (800) 935-6487 or pflynn@alaron.com.
