dfitzo53 Posted March 17, 2020 Share Posted March 17, 2020 18 hours ago, techboy said: I also think I read somewhere on this board that market timing is generally a bad idea. That's just because this one weirdo keeps going on and on about it. Not naming any names. 1 2 1 Link to comment Share on other sites More sharing options...
88Comrade2000 Posted March 17, 2020 Share Posted March 17, 2020 Forget recession. If the shutdown has to last a long time; we could be looking at a Great Depression. The entire world’s economy could collapse and it will take a long time to pull out. Link to comment Share on other sites More sharing options...
Larry Posted March 17, 2020 Share Posted March 17, 2020 Can someone who knows more about economics than me (Which, I've concluded, isn't most people, but it's still a really really large number) what the problem is with low oil prices? The reason why our government should be intervening in this matter, for the purpose of keeping the price up, is . . . ? Link to comment Share on other sites More sharing options...
GoCommiesGo Posted March 17, 2020 Share Posted March 17, 2020 12 minutes ago, Larry said: Can someone who knows more about economics than me (Which, I've concluded, isn't most people, but it's still a really really large number) what the problem is with low oil prices? The reason why our government should be intervening in this matter, for the purpose of keeping the price up, is . . . ? I don't know much but I'll take a stab at it. The US shale industry is profitable somewhere around 40-50 a barrel. With the current economic situation if the price of oil continues to drop and hits the $30 a barrel for a long periods the entire industry could be come untenable. Layoffs and cost cutting will come into play. Stacking that together would likely have downstream ripple effects through the entire economy. I could be really wrong also. Link to comment Share on other sites More sharing options...
88Comrade2000 Posted March 17, 2020 Share Posted March 17, 2020 15 minutes ago, Larry said: Can someone who knows more about economics than me (Which, I've concluded, isn't most people, but it's still a really really large number) what the problem is with low oil prices? The reason why our government should be intervening in this matter, for the purpose of keeping the price up, is . . . ? The oilmen got to make their profits. I would assume low oil prices hurts the U.S. industry also. Link to comment Share on other sites More sharing options...
gbear Posted March 17, 2020 Share Posted March 17, 2020 (edited) Larry, I believe we are the largest supplier of natural gas in the world. The methods we use to produce it are not competitive if the price of oil drops too low. Think about North Dakota. They had a huge boom in natural gas exploration and fracking, and then the price of oil dropped. I don't remember what the price point is at which point fracking and horizontal drilling fail to produce a cost competitive source of energy, but below that point, the U.S. looses it role as the leading producer of a product used to produce energy. Further, the U.S. loses a lot of export sales. When the U.S. has not been a net exporter of oil/natural gas, we could pretty much map out our recessions and booms according to spikes in the cost of energy causing recessions. That is one reason why it is a little odd from a historical perspective to see us trying to keep the price up. It means the benefits to the oil/gas industry is thought to have a greater impact on our economy than the drags of higher production costs due to increased costs for power. Edited March 17, 2020 by gbear 2 Link to comment Share on other sites More sharing options...
FanboyOf91 Posted March 17, 2020 Share Posted March 17, 2020 (edited) 28 minutes ago, Larry said: Can someone who knows more about economics than me (Which, I've concluded, isn't most people, but it's still a really really large number) what the problem is with low oil prices? The reason why our government should be intervening in this matter, for the purpose of keeping the price up, is . . . ? Thanks to fracking, the US is one of the largest fossil fuel producers in the world. States like North Dakota, Alaska, and Texas are going to get economically destroyed at current prices. In fact, there's a theory that the 2016 manufacturing recession that doomed Hillary in the Midwest was caused by the 2014-2015 oil price decline. Edited March 17, 2020 by FanboyOf91 Link to comment Share on other sites More sharing options...
Larry Posted March 17, 2020 Share Posted March 17, 2020 Oh, I get that a reduced price might make some production unprofitable. But folks, we're at a point where we ought to be shutting down maybe 90% of the jobs in the country, for a month or two. Is the thought that we can't have an oil price drop, because some oil/gas/etc workers might see some temporary layoffs really that scary? And is it a bigger threat than the economic benefits that lower energy costs would have on, well, every single industry in the country? And as to energy security, that oil/gas/coal/whatever isn't going anywhere. When the price goes back up (and we know it will), it'll still be there, and we'll still have the technology to get it. Link to comment Share on other sites More sharing options...
FanboyOf91 Posted March 17, 2020 Share Posted March 17, 2020 Link to comment Share on other sites More sharing options...
PeterMP Posted March 17, 2020 Share Posted March 17, 2020 (edited) 57 minutes ago, Larry said: Can someone who knows more about economics than me (Which, I've concluded, isn't most people, but it's still a really really large number) what the problem is with low oil prices? The reason why our government should be intervening in this matter, for the purpose of keeping the price up, is . . . ? The fracking industry supports the economy in a large number of states. In the context of politics, especially red areas and red states (western PA, TX, Dakotas, etc.) They depend on oil to be a certain value. Cheap oil means they go under and the economy of those states is hurt. If they want to the Saudis and Russia, at least short term, can generate oil more cheaply than done through large parts of the US and really hurt the US component of the industry. Further, a lot the fracking industry is based on loans and mortgages. Companies grew quickly and to do so they had to borrow money. If they go under, those loans go bad. Banks don't want that to happen. Going into the future, this gives the likes of Russia and Saudis the ability to control oil prices. Banks are going to be very skeptical of investing in US fracking if the Russians and Saudis can just cut prices and kill it any time they like. (I believe everywhere in the US, but certainly at least in most states, it is against the law for a gas station to sell gas below a certain value and take a loss. The concern is that a deeply supported gas station will come into an area, offer real low prices, drive the other gas stations out of business, and then raise prices. If a new competitor comes into the market, the gas stations just drops prices again and puts them out of business. I'm not sure Russia and the Suadis are selling oil at a loss, but they are certainly selling oil for less than any historical norm. And so the same concern applies.) Edited March 17, 2020 by PeterMP Link to comment Share on other sites More sharing options...
Renegade7 Posted March 17, 2020 Share Posted March 17, 2020 1 hour ago, Rdskns2000 said: Forget recession. If the shutdown has to last a long time; we could be looking at a Great Depression. The entire world’s economy could collapse and it will take a long time to pull out. Watching CNBC because they are having conversation on bailouts vs suspending debt payments and for who. Slowly but surely folks on getting on same page of focusing on the virus first because that will answer how they address the economic contraction. But what's starting to come up is how to help everyone tred water until then instead jus allowing mass layoffs. If companies can be helped during the pause they wouldnt have to fire their entire company and go out of business. If we going to pause the entire economy, maybe the only way to save it is to literally pause the entire economy. Link to comment Share on other sites More sharing options...
TradeTheBeal! Posted March 17, 2020 Share Posted March 17, 2020 3 minutes ago, Renegade7 said: Watching CNBC because they are having conversation on bailouts vs suspending debt payments and for who. Slowly but surely folks on getting on same page of focusing on the virus first because that will answer how they address the economic contraction. But what's starting to come up is how to help everyone tred water until then instead jus allowing mass layoffs. If companies can be helped during the pause they wouldnt have to fire their entire company and go out of business. If we going to pause the entire economy, maybe the only way to save it is to literally pause the entire economy. Would require extremely strong political leadership to enact it and see it through. Think Trump can pull it off? 2 Link to comment Share on other sites More sharing options...
PeterMP Posted March 17, 2020 Share Posted March 17, 2020 (edited) 18 hours ago, PleaseBlitz said: Cutting rates is a step entirely intended to boost growth, and the traditional downside is inflation. The risk we are running is that cutting rates to zero causes the inflation without the boost to growth. https://en.wikipedia.org/wiki/Stagflation Inflation is not directly related to interest rates. Inflation goes up when demand outstrips supply, which is currently happening for things like toilet paper. But longer term unless key workers can't go to work that seems unlikely to happen here. More and more production is being automated and productivity is way up (in general compared to historical norms), and it seems like except for common essentials (e.g. toilet paper) that demand will drop during this time. Very short term, you might see some inflation in the context of price gauging for things like toilet paper, but I don't see how that can really be maintained unless we get to the point where large numbers of people can't go to work. Another possibility is if the government does infuse lots of money into the system (e.g. gives everybody $10,000), everybody emerges at once looking to spend their money, but during this time lots of businesses have gone out of business. Then you get a situation where demand out paces supply. Now, hopefully we'd see growth. And I think this is at the heart of why the Fed cut rates. Hopefully, it allows companies to more easily get credit that helps tie themselves over through this period. The real question is are the banks going to lend or are they going to just sit on the money and take the profits from the low interest rates. **EDIT** Looking, the Fed has cut the interest rates on excess reserves. https://fred.stlouisfed.org/series/IOER/ So that's good and should incentiveize lending by banks. Edited March 17, 2020 by PeterMP Link to comment Share on other sites More sharing options...
FanboyOf91 Posted March 17, 2020 Share Posted March 17, 2020 Link to comment Share on other sites More sharing options...
Renegade7 Posted March 17, 2020 Share Posted March 17, 2020 Just now, TryTheBeal! said: Would require extremely strong political leadership to enact it and see it through. Think Trump can pull it off? No. Someone will have to do it for him and hell get the credit, sorta like Bush did. That situation was so bad, Obama helped him do it. Bush panicked and said hed sign whatever was neccesary coming from congress. We're at a point that we know what we got with Trump so it needs to be all hands on deck, I'm going to look for Biden to reach out at some point. I wouldn't find it inappropriate, but I can understand some wanting him to wait until after the general is decided to take more of a leadership role. If he wins, he has to. Link to comment Share on other sites More sharing options...
Larry Posted March 17, 2020 Share Posted March 17, 2020 5 minutes ago, Renegade7 said: Watching CNBC because they are having conversation on bailouts vs suspending debt payments and for who. Slowly but surely folks on getting on same page of focusing on the virus first because that will answer how they address the economic contraction. But what's starting to come up is how to help everyone tred water until then instead jus allowing mass layoffs. If companies can be helped during the pause they wouldnt have to fire their entire company and go out of business. If we going to pause the entire economy, maybe the only way to save it is to literally pause the entire economy. I read like a week ago that Italy suspended all mortgages for six months. Haven't read any details, but if I were doing it, I think what I'd do is: No mortgage payments for six months. Government will make interest-only payments, to the banks. Every mortgage is extended six months. After six months, everybody's mortgage payment is the same as it was. Their loan balance is unchanged. Only changes are, they made no payments for six months, and they still have the same number of payments as they did. And the banks got their profit, on time. And all it costs the government, is the interest on all those mortgages. Which isn't free, but I got a feeling we're going to be seeing much bigger bills from other things. 2 Link to comment Share on other sites More sharing options...
No Excuses Posted March 17, 2020 Share Posted March 17, 2020 Ultimately the return to normalcy is entirely dependent on how fast we can scale up diagnostics in this country. The lockdown ends when there is concrete evidence that we are slowing transmission. Unfortunately we are on week 7 of the dumbest people in the country telling us “anyone can get tested by the end of this week!”. 1 Link to comment Share on other sites More sharing options...
Larry Posted March 17, 2020 Share Posted March 17, 2020 7 minutes ago, TryTheBeal! said: Would require extremely strong political leadership to enact it and see it through. Think Trump can pull it off? Think Trump can solve the toilet paper shortage? Link to comment Share on other sites More sharing options...
TheGoodBits Posted March 17, 2020 Share Posted March 17, 2020 7 minutes ago, TryTheBeal! said: Would require extremely strong political leadership to enact it and see it through. Think Trump can pull it off? we’re gonna cut big ****ing checks to casinos, oil companies, and airlines. They still won’t keep people on their payroll, but their shareholders/political donors will be happy. 2 Link to comment Share on other sites More sharing options...
twa Posted March 17, 2020 Share Posted March 17, 2020 The Saudi's are playing for market share, the harm to us in general is small. a big factor is they are jacking up oil transport rates and demand for storage...the us stockpiling some oil cheap is a good move since we have storage capacity in the strategic reserves and capacity to transport. the tumble in demand will make their game less effective Link to comment Share on other sites More sharing options...
TradeTheBeal! Posted March 17, 2020 Share Posted March 17, 2020 5 minutes ago, skinsfan_1215 said: we’re gonna cut big ****ing checks to casinos, oil companies, and airlines. They still won’t keep people on their payroll, but their shareholders/political donors will be happy. You forgot our treasured cruise industry...which pays essentially no taxes. 1 Link to comment Share on other sites More sharing options...
BatteredFanSyndrome Posted March 17, 2020 Share Posted March 17, 2020 So for the first time in my life, the wife and I have liquidity - just sitting in an everyday savings, during a financial crash. Back in 2009, I had no savings to work with when my company stock at the time, Wells Fargo, was 8 bucks a share. I practically begged my mother to buy as much of it as she could, but she wouldn't - as she was staring down the barrel of being laid off as well. Within 10 months, it was at 48 bucks. Anyone else plotting buys right now? I've watched more Jim Cramer the past week than ever before in my life. 1 Link to comment Share on other sites More sharing options...
Renegade7 Posted March 17, 2020 Share Posted March 17, 2020 4 minutes ago, BatteredFanSyndrome said: Anyone else plotting buys right now? I've watched more Jim Cramer the past week than ever before in my life. Too early for me, maybe after the first spike and theres timeline for mass social distancing ending. @No Excuses is right, too much of this is from stuff we dont know and should know by now. Link to comment Share on other sites More sharing options...
TheGoodBits Posted March 17, 2020 Share Posted March 17, 2020 8 minutes ago, BatteredFanSyndrome said: So for the first time in my life, the wife and I have liquidity - just sitting in an everyday savings, during a financial crash. Back in 2009, I had no savings to work with when my company stock at the time, Wells Fargo, was 8 bucks a share. I practically begged my mother to buy as much of it as she could, but she wouldn't - as she was staring down the barrel of being laid off as well. Within 10 months, it was at 48 bucks. Anyone else plotting buys right now? I've watched more Jim Cramer the past week than ever before in my life. Note: I don’t think we’re near the bottom yet. I’d guess that airlines are a safe bet to rebound if you are fine with holding for a few years. Low oil prices could actually help them a lot. Large scale restaurant chains. Cruises might take a lot longer and have a higher chance of going out of business altogether. Link to comment Share on other sites More sharing options...
BatteredFanSyndrome Posted March 17, 2020 Share Posted March 17, 2020 Oh yeah, I'm absolutely certain we're nowhere near the bottom. I'm just plotting the course right now. Going to let this play out for a bit. 1 Link to comment Share on other sites More sharing options...
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