War Imminent in Straits of Hormuz? $200 a Barrel Oil?

Posted on January 6, 2012 by MN Gordon

War Imminent in Straits of Hormuz? $200 a Barrel Oil?

[Editor’s note: Today we bring you a guest essay by John Daly detailing the burgeoning potential for conflict in the Persian Gulf and how this could impact oil prices.  Reprinted with permission from OILPRICE.com.]

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The World’s Most Important Oil Chokepoint

The pieces and policies for potential conflict in the Persian Gulf are seemingly drawing inexorably together.

Since 24 December the Iranian Navy has been holding its ten-day Velayat 90 naval exercises, covering an area in the Arabian Sea stretching from east of the Strait of Hormuz entrance to the Persian Gulf to the Gulf of Aden.  The day the maneuvers opened Iranian Navy Commander Rear Admiral Habibollah Sayyari told a press conference that the exercises were intended to show “Iran’s military prowess and defense capabilities in international waters, convey a message of peace and friendship to regional countries, and test the newest military equipment.”  The exercise is Iran’s first naval training drill since May 2010, when the country held its Velayat 89 naval maneuvers in the same area.  Velayat 90 is the largest naval exercise the country has ever held Continue reading →

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Set the Children Free

Posted on January 3, 2012 by MN Gordon

There are things that are so obvious they shouldn’t warrant discussion…but they do.  For there are blockheads out there whose brains are so soft they don’t know obvious from Adam’s off ox.  Experience tells us that common sense is remarkably uncommon.  Nowhere is this more spot-on than when it comes to money and politics.

For example, a majority of voters believe they can live off the expense of others.  This is utter nonsense.  Yet it’s a popular notion among the broad flock of ballot casters.  In fact, politicians have promised them something for nothing for generations.

Incredibly, politicians have appeared to make good on their promises over the last 70 years.  They had the advantage of a strong tailwind.  The economy was expanding and fiscal gaps could easily be papered over with debt.

Your average third grader knows this can’t go on forever.  Nonetheless, your average voter thinks they’ll still get their checks before the entitlement system breaks down.  The next 5 years will crush this delusion from them…the breakdown has already begun Continue reading →

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2012: Predictions, Prognostications, and Prophecies

Posted on December 30, 2011 by MN Gordon

2012: Predictions, Prognostications, and PropheciesBefore we turn the page to 2012 we must take a look back at the year that just passed so we can extract context for the year to come.  Looking at where the stock market began and ended in 2011, it appears nothing much happened.

As of Thursday’s close, the S&P500 was at 1,263.  This notched an increase of less than one half of one percent from its year’s opening at 1,257.  Obviously, these two data points, taken alone, do not offer an appropriate depiction of the year’s market.  The S&P500’s 52-week range, a gaping gulch extending from 1,074 to 1,370, provides a more accurate perspective of what went on.

In short, things went haywire.  Massive selloffs, like the S&P500’s 16.8 percent swan dive between July 22nd and August 8th, were followed by wild swings to the upside.  Traders who capitalized on the extreme volatility may have loved it, but for those saving for retirement, via an index mutual fund, the instability was incredibly unnerving.

Geopolitically, the world’s an entirely different place than it was one year ago.  After more than eight years of searching for weapons of mass destruction, the U.S. military vacated Iraq.  Unexpectedly, dictators in power for a generation or more, like Muammar Gaddafi and Hosni Mubarak, were removed by popular force. Continue reading →

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There’s No Such Thing as a Free Lunch

Posted on December 27, 2011 by MN Gordon

By all accounts the sky was falling on December 5, 2008.  Several months before, credit market liquidity had glazed over like cold winter molasses and, after over 150-years of business, Lehman Brothers had ignominiously vanished from the face of the earth.  What’s more, just eleven days after Lehman Brothers went bust, Washington Mutual kicked the bucket too.

The demise of Lehman Brothers ($691 billion) and Washington Mutual ($327 billion) marked the two largest American bankruptcies in history.  But that wasn’t all that was going wrong at the time.  Stocks had fallen off a cliff – the DOW had dropped 23 percent over the past three months – and the economy was in shambles too.

On that Friday, the Labor Department reported the economy had lost over a half million jobs in November and over 1.3 million jobs since August of that year.  Terror and panic had spread from Wall Street and Main Street to Washington, and the Fed was determined to prevent an economic depression no matter what the cost.

No one knew it at the time.  In fact, it wasn’t public news until last week.  But thanks to the work of Bloomberg, it has been documented that on December 5, 2008, the Fed loaned out a single-day peak of $1.2 trillion to banks and financial companies through the various lending facilities it set up in fall of 2008 to backstop financial markets. Continue reading →

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