Financial Review

Dow 20K Redux

Sinclair Noe — January 26, 2017

Podcast: Play in new window | Download (Duration: 12:01 — 5.5MB)

Subscribe: iTunes | Android | RSS

DOW + 32 = 20,100
SPX – 1 = 2296
NAS – 1 = 5655
RUT – 6 = 1375
10 Y + .02 = 2.51%
OIL + 1.00 = 53.75
GOLD – 12.90 = 1188.80

Yesterday the Dow Industrial Average, the S&P 500 Index and the Nasdaq Composite all hit record high closes, but lest you think what’s happening is merely a US phenomenon, let me remind you: The entire world is now breaking out, in concert. the MSCI All Country World Index Ex-US ETF, which holds everything else other than US stocks, just broke out to the highest level in almost 2 years.

The big focus today was another flood of earnings results. It was the busiest day for the fourth quarter reporting season as 39 S&P firms release their numbers.  After the closing bell, Microsoft report earnings of 83 cents per share, topping estimates of 79 cents, with better than expected revenue of $26.07 billion. Microsoft traded today at an all-time high.

Shares of Alphabet fell in extended trading after reporting weaker-than-expected fourth-quarter earnings. The Google and YouTube parent reported net income of $5.3 billion, or $7.56 a share, compared with $6 billion, or $7.06 a share, in the year-earlier period. Revenue topped estimates.

Intel reported quarterly earnings and revenue that beat estimates. Intel posted fourth-quarter earnings per share of 79 cents. Revenue for the quarter came in at $16.37 billion. Analysts expected Intel to post earnings of 74 cents a share and 15.752 billion in revenue. Intel has made efforts to move away from reliance on the declining PC business. The company’s focus has shifted to the “Internet of things” and to its data center group, which creates chips for large computers.

Comcast beat expectations for fourth quarter earnings and revenue. Earnings were up 9.9 percent from 81 cents per share a year earlier, while revenue rose 9 percent from $19.25 billion. The parent company of NBCUniversal also announced a 15 percent increase in its dividend and reported a 2-for-1 stock split.

Ford Motor matched estimates with fourth quarter profit of 30 cents per share after items, while revenue beat estimates. Ford posted a fourth quarter loss but full-year profit for 2016 was its second-best on record, trailing only its 2015 results. And if that sounds a bit confusing, well, add Ford to the list of companies that are reporting muddled and confusing reports. Ford reaffirmed its forecast that profits for 2017 would be lower, in contrast to more upbeat forecasts from GM and Fiat Chrysler.

Southwest Airlines earned an adjusted 75 cents per share for its fourth quarter, beating estimates by 5 cents, while revenue was also above estimates – despite higher fuel costs and pay increases for its workers.

Caterpillar reported adjusted quarterly profit of 83 cents per share, beating estimates of 66 cents, but revenue was below forecasts. Caterpillar warned of much lower profits for 2017, saying results continue to be impacted by weak economic conditions around the world.

Biogen beat earnings estimates but missed revenue forecasts. The drug maker lowered its 2017 revenue guidance.

Northrop Grumman beat earnings and revenue estimates. Northrop saw better sales of in its aerospace systems business, which is involved in F-35 fighter jet production.

Seeds and chemical maker Dow Chemical reported a better-than-expected quarterly adjusted profit, helped by its focus on consumer markets such as agriculture and automotive, and a move to take full control of its Dow Corning venture. Excluding the Dow Corning transaction, Dow’s sales rose 2.5 percent to $11.75 billion in the fourth quarter, with sales increasing in four of its five businesses.

Stanley Black & Decker earned $1.71 per share for its latest quarter, 3 cents above estimates, with revenue very slightly below forecasts. Its earnings were lower year over year, hurt by higher restructuring costs.

Whirlpool, the world’s largest appliance maker missed estimates by 11 cents with adjusted quarterly profit of $4.33 per share, though revenue did slightly beat forecasts. Declining sales in the U.K. following the Brexit vote was among the factors hurting its results.

EBay  posted quarterly results in line with forecasts at an adjusted 54 cents per share, while revenue was also in line with forecasts. The company did give a lighter than expected current quarter outlook, but made optimistic comments about its revamped platform.

Johnson & Johnson announced a $30 billion deal to acquire Actelion, a Swiss biotechnology firm; the all-cash deal includes spinning off Actelion’s research and development pipeline. The biggest European drugs takeover in 13 years gives J&J access to the Swiss group’s range of high-price, high-margin medicines for rare diseases.

WGL Holdings  agreed to be acquired by AltaGas for about $6.4 billion in cash.

McKesson is buying privately held CoverMyMeds for about $1.1 billion to strengthen its technology offerings.

United Rentals is purchasing NES Rentals Holdings II for about $965 million.

Ant Financial Services Group, an affiliate of Chinese e-commerce firm Alibaba Group, said it would buy U.S. money-transfer company MoneyGram in a deal valued at about $880 million.

And here’s a potential deal to watch. Verizon Communications is interested in exploring a combination with cable company Charter Communication as part of a long list of acquisition targets but no proposal has been made for a tie-up between the two companies.

Oprah Winfrey is starting a joint venture with Kraft Heinz called Mealtime Stories. Kraft will develop and sell the new line, which will initially focus on ready-to-eat refrigerated dishes; 10% of products’ profits will be donated to charities that seek to eradicate hunger.

The trade gap in goods — services are excluded — slipped 0.5% to $65 billion, the government said Thursday in its advanced report. The full report will be released next week. Wholesale inventories, meanwhile, jumped 1% in December and retail inventories were flat.

The number of Americans who applied for unemployment benefits climbed by 22,000 to a one-month high of 259,000 in late January.

New-home sales declined to a seasonally adjusted annual rate of 536,000, the Commerce Department said Thursday. That was 10.4% lower than an upwardly adjusted November pace of 598,000 and 0.4% lower than a year earlier.

Tomorrow we get the government’s first estimate of fourth quarter GDP. Gross domestic product, the sum of the economy’s performance, is forecast to taper off to 2.2% in the fourth quarter. The economy expanded at a 3.5% pace in the late summer and early fall.

Authorities in Brazil have issued an arrest warrant for former billionaire Eike Batista, the latest business leader implicated in a giant corruption investigation. Batista, once ranked by Forbes as the world’s seventh-richest man, is the most recent target of Operation Car Wash, an alleged multi-billion-dollar kickback scheme that has led to the arrest of hundreds of politicians and business moguls.

Federal prosecutors accuse him of laundering money and bribing state officials in exchange for lucrative construction and mining contracts. Federal police issued the warrant and raided Batista’s Rio de Janeiro mansion but did not find Batista; his lawyer says he is in New York and would turn himself in as soon as possible.

President Trump signed an order Wednesday to start the planning process to build the wall. There are already about 650 miles of fencing along the border, mostly in more populated areas. Presumably, most of that will stay in place. That means about 1,300 miles of wall need to be built.

As far as cost goes, Trump has cited a $10 billion estimate. That comes to about $7.4 million per mile. By comparison it only costs about $3 million to build a mile of a typical two-lane road. So, for $10 billion you could build a road roughly from Seattle to Miami. But other estimates have the cost of the wall climbing to as much as $25 billion not including land acquisition costs.

This morning, Mexican President Enrique Peña Nieto canceled a planned visit to the White House, saying Mexico will not pay for the wall. Later in the day, Trump said the meeting was called off by "mutual agreement". White House spokesman Sean Spicer later said that Trump would pay for the wall with a 20 percent tax on all imports from Mexico.

Financial Review

20K

Sinclair Noe — January 25, 2017

Podcast: Play in new window | Download (Duration: 12:06 — 5.5MB)

Subscribe: iTunes | Android | RSS

DOW + 155 = 20,068
SPX + 18 = 2298
NAS + 55 = 5656
RUT + 13 = 1382
10 Y + .05 = 2.52%
OIL – .36 = 52.82
GOLD – 7.90 = 1201.60

The Dow Industrials topped 20,000 for the first time ever. The S&P 500 and the Nasdaq Composite closed at record highs yesterday. European markets traded higher, with many indexes up by about 1%. Most Asian markets ended the day with gains.

The Dow Industrials first hit 10,000 back in 1999 and for the next 10 years, the Dow went up and down multiple times before finally breaking out in 2009. The Dow topped 15,000 in 2013. It only took 43 days to go from 19,000 to 20k. Can it go higher? Sure, a trend in place is more likely to continue than it is to reverse – until it reverses.

The Dow Industrial Average first started in 1896 – only one company on that original list is still on the list: General Electric. And the 120-year old Dow hit 1,000 for the first time in 1972; then it crashed 40% and didn’t make it back to 1,000 until 1980. Go figure.

President Trump signed an executive action today directing federal resources toward building a border wall with Mexico. Trump said construction of the wall would begin within months, with planning starting immediately. Initially the US will pay for the wall, but Trump insists that Mexico will reimburse the costs later. Mexico’s President Enrique Peña Nieto is scheduled to visit Trump in Washington on Jan. 31.

The border wall is included in an executive action titled Border Security and Immigration Enforcement Improvements, which calls for hiring more Border Patrol agents, stricter enforcement, and expanding detention capacity, possibly with more private prisons. A second executive action, titled Enhancing Public Safety in the Interior of the United States calls for withholding federal funds from sanctuary cities.

Today’s executive actions also seek to force other nations to take back criminal aliens by using leverage such as withholding U.S. visas. And it will allow Immigration and Customs Enforcement to more aggressively arrest, detain and remove people from the US.

President Trump said today he would seek a major investigation of alleged voter fraud in the November election. Trump said on Twitter: “I will be asking for a major investigation into VOTER FRAUD, including those registered to vote in two states, those who are illegal and…even, those registered to vote who are dead (and many for a long time). Depending on results, we will strengthen up voting procedures!”

And it didn’t take long to find someone registered to vote in 2 states – Steve Mnuchin, Trump’s nominee for Treasury Secretary is registered in New York and California – which is legal – although he can only vote once. And Steve Bannon, Trump’s senior counselor was registered in New York and Florida – not that there’s anything wrong with that.

Trump also said he wants to “fight fire with fire” when it comes to stopping terrorism, suggesting that he could be open to bringing back torture because he “absolutely” believes it works. The Trump administration is also considering a 120-day suspension of refugee admissions and cutting the total number allowed into the U.S. in the current fiscal year from 110,000 to 50,000, actions that could be announced as soon as Thursday.

When will the gavel drop? According to WSJ, President Trump has culled the candidates to fill a vacancy on the Supreme Court to a handful of federal appellate judges. The list includes Neil Gorsuch, Thomas Hardiman, Raymond Kethledge and William Pryor. Trump said he would make his nomination next week, replacing the late Justice Antonin Scalia.

Trump on Tuesday signed executive actions to advance the approval of two controversial oil pipelines — Dakota Access and Keystone XL. Trump’s administration has instructed the Environmental Protection Agency to remove the climate change page from its website.

The Trump administration has also instituted a temporary gag order against government scientists at the Environmental Protection Agency and Department of Agriculture, barring the agencies from publishing any news releases, blog or social-media posts or otherwise communicating with the public about taxpayer-funded research.

The Twitter account of Badlands National Park posted a series of climate-change factoids on Tuesday, apparently, an act of defiance against President Trump, who has said he believes climate change is a hoax. The tweets were removed hours later.

Heavy pollution enveloping much of Europe has prompted emergency measures across the continent, as extreme cold, no wind and heavy burning of coal and wood for heating left many regions shrouded in smog. In several countries, including Britain, France and Belgium, officials have cautioned against physical exertion for children and the elderly. Hundreds of flights have also been canceled and heavy polluting vehicles have been ordered off the road.

Puerto Rico’s new governor wants to replace a law that allows the U.S. territory to redirect revenues earmarked for bondholders to pay for essential services. The government planned to introduce legislation on the so-called debt moratorium law today.

It’s another busy day for earnings reports. Before the opening bell, Boeing beat analysts’ profit estimates despite another charge for its military tanker aircraft and said it expects to deliver more planes and higher earnings in 2017, though revenue likely will fall. Boeing profit rose as the 787 Dreamliner emerged from a decade of losses.

United Technologies posted a fourth-quarter profit, compared with a year-ago loss, and reiterated its 2017 profit and sales forecasts. The company reported Wednesday income from continuing operations of $1.024 billion and net income, which includes results from discontinued operations, of $1.013 billion.

Under the diluted earnings (loss) per share of common stock heading, the line item for continuing operations showed $1.26, but the line for discontinued operations just showed a loss of 1 cent. For investors to get net earnings per share, they are required to subtract a penny from $1.26, to get $1.25. It’s simple math but not necessarily easy. The SEC is supposed to keep an eye on this kind of garbage accounting.

Freeport-McMoRan reported a lower-than-expected profit before the opening bell but said it would double gold sales to 2.2 million ounces this year, while selling less copper. Freeport is being helped by higher prices for both metals but its copper business has been dented recently by a ban on exports of copper concentrates in Indonesia. Since November 8, Phoenix-based Freeport has experienced an increase of just over 50%.

Alcoa Corporation logged a net loss of $125 million or 68 cents per share for the fourth quarter of 2016. Barring one-time items, adjusted earnings came in at 14 cents per share for the reported quarter, missing. Revenue topped estimates. This is the company’s first quarterly report as a standalone, publicly traded company.

Qualcomm slid after the chip maker issued a weak second-quarter outlook amid ongoing legal and regulatory challenges. Apple earlier this month filed a suit against Qualcomm for allegedly leveraging its monopoly position to demand onerous royalty rates. The Federal Trade Commission last week also filed a complaint against the company for anti-competitive practices.

AT&T reported fourth-quarter earnings in line with expectations and sales slightly below forecasts.

Cisco Systems has agreed to buy software maker AppDynamics for $3.7 billion. AppDynamics had been planning to price its IPO tonight.

Following activist investor pressure for a split, Bob Evans Farms has agreed to sell its restaurant business to PE firm Golden Gate Capital for $565 million. Bob Evans will now focus on packaged foods.

Amazon.com now has a market cap of $390 billion, and per research from Credit Suisse, the retail giant is now worth more than the top eight traditional brick-and-mortar retailers combined. For the record, that roster includes Best Buy, Macy’s, Target, JCPenney, Nordstrom, Walmart, Kohl’s and Sears.

Bottled water – not soda – is taking center stage in PepsiCo’s war against Coca-Cola. Pepsi has bought a 30-second Super Bowl ad to debut the company’s new premium bottled water brand, “LIFEWTR,” that is positioned to compete with its archrival’s “smartwater.” The product will be priced at around $2.70 for a 1-liter bottle.

 Mission Innovation 

Accelerating the Clean Energy Revolution.

 

Joint Launch Statement

 

November 30, 2015, in Paris, France, issued on behalf of the Governments of Australia, Brazil, Canada, Chile, China, Denmark, France, Germany, India, Indonesia, Italy, Japan, Mexico, Norway, Republic of Korea, Saudi Arabia, Sweden, the United Kingdom of Great Britain and Northern Ireland, the United Arab Emirates, and the United States of America:

Accelerating widespread clean energy innovation is an indispensable part of an effective, long-term global response to our shared climate challenge; necessary to provide affordable and reliable energy for everyone and to promote economic growth; and critical for energy security. While important progress has been made in cost reduction and deployment of clean energy technologies, the pace of innovation and the scale of transformation and dissemination remains significantly short of what is needed.

For these reasons, participating countries have come together to launch Mission Innovation to reinvigorate and accelerate public and private global clean energy innovation with the objective to make clean energy widely affordable.  Additional countries will be encouraged to join in the future.

Double Governmental Investment in Clean Energy Innovation. Each participating country will seek to double its governmental and/or state-directed clean energy research and development investment over five years. New investments would be focused on transformational clean energy technology innovations that can be scalable to varying economic and energy market conditions that exist in participating countries and in the broader world. Research and development projects would be designed and managed to attract private investors willing to advance commercialization. While each participating country’s clean energy innovation portfolio is unique and reflects national priorities, all participating countries share the common goal to accelerate the pace of the clean energy revolution now underway in an appropriate way.  This endeavor should help facilitate affordable access to critical technologies.

Private Sector and Business Leadership. Business needs to play a vital role in the commercialization and cost-effectiveness of clean energy breakthroughs, and participating countries commit to work closely with the private sector as it increases its investment in the earlier-stage clean energy companies that emerge from government research and development programs. Participating countries especially commend the contribution being made by a group of investors through the Breakthrough Energy Coalition. These investors from 10 countries and representing leadership from many key economic sectors are prepared to drive innovation from the laboratory to the market through the investment of patient capital at unprecedented levels into early-stage technology development into participating countries. This commitment, as stated in the Coalition’s principles, will be focused on investment opportunities sourced from the countries participating in Mission Innovation.  Participating countries also look forward to working with additional private sector partners who are willing to share our common goal of increasing investment for clean energy innovation.

Implementation.  Participating countries will implement Mission Innovation in a transparent, effective, and efficient manner.  Strong linkages with our investor partners and other key stakeholders are essential.  Working with existing international institutions, participating countries will cooperate and collaborate to help governments, private investors, and technology innovators to make available data, technology expertise, and analysis in order to promote commercialization and dissemination of clean energy technologies so they reach global market penetration.  Participating countries will build and improve technology innovation roadmaps and other tools to help in our innovation efforts, to understand where research and development is already happening, and to identify gaps and opportunities for new kinds of innovation.  Participating countries may also pursue joint research efforts through public-private partnerships as well as joint research among participating countries.  We will also seek to enhance global clean energy innovation capacity, including through ongoing bilateral engagement with participating countries.  The first implementation meeting for Mission Innovation will be held in early 2016.

Information Sharing.  Each participating country commits to provide, on an annual basis, transparent, easily-accessible information on its respective clean energy research and development efforts to promote transparency, engage stakeholders broadly, spur identification of collaborative opportunities, and provide the private sector more actionable information to improve its ability to make investment decisions.

Wednesday, August 13, 2014 - Oil, At Least in Theory

Financial Review with Sinclair Noe

DOW + 91 = 16,651
SPX + 12 = 1946
NAS + 44 = 4434
10 YR YLD - .03 = 2.41%
OIL - .04 = 97.33
GOLD + 3.70 = 1313.20
SILV - .11 = 19.91

The economic news today did not point to a positive session for Wall Street. Retail sales for July were flat compared to June. Excluding autos and gas, retail sales were up just 0.1%. Clothing sales increased 0.4% but that was primarily due to extreme discounting. That report was confirmed by an earnings report from Macy’s, which missed expectations on earnings and revenue, and then lowered guidance. In after-hours trade, Cisco reported better than expected earnings and revenue.

The US has deployed 130 Marines and Special Operations forces to northern Iraq to help assess ways to rescue thousands of members of the Yazidi religious group taking refuge on Mount Sinjar. Those military advisers will not have a combat role, but the Defense Department left open the possibility that US troops could help create a safe passage for the Yazidi off Mount Sinjar. That might put US troops in direct combat with the ISIS militants trying to kill the Yazidi, a proposition President Obama has not signed off on, but one the military advisers are exploring.

The US and Iran don't agree on much, but it appears the two countries are backing Iraqi Prime Minister Nouri al-Maliki's replacement, Haider al-Abadi. Iran's endorsement on Tuesday means that Maliki, who has indicated he won't go quietly, will have an even harder time holding onto his position. The United States and its allies hope that replacing Maliki, who alienated the Sunnis of Iraq, will undermine support for the militant group the Islamic State in Iraq and Syria (ISIS). For now, Maliki is trying to cling to power, but his days appear numbered.

There are daily multiple sorties by US fighter bombers flying off a US Navy aircraft carrier in the Gulf, some resulting in airstrikes on advancing ISIS forces that have threatened civilian refugees and the Kurdish capital of Erbil. Unmanned US drones are in the air gathering a constant stream of intelligence which is being fed back to a US-manned operations center in Baghdad and then shared with America's allies.

There are close to 1,000 US military advisors in Iraq, including Special Operations forces, divided between Baghdad and Kurdistan and the CIA is believed to be running an operation to supply Kurdish forces, the Peshmerga, with arms and ammunition. Iraqi Kurds have overtaken 2 northern oilfields.  The two oilfields are said to have a combined daily output capacity of some 400,000 barrels per day. The operations are most certainly not entirely humanitarian. France and Germany both say they will send military equipment to help the Kurds defend themselves. Hercules transport planes have been dropping aid to civilians fleeing from the onslaught of ISIS.

While the case for intervention on humanitarian grounds to save the lives of thousands of fleeing refugees is overwhelming, there is now the risk of what is known as "mission creep"; of a small, narrowly defined operation ballooning out of control, sucking in Western countries into a lengthy conflict with no clear exit. Politicians are fond of saying "there will be no boots on the ground" but in practice there are already growing numbers of US military personnel deployed to Iraq behind the scenes. The ISIS fighters are now embedding in residential areas like Mosul, essentially using civilians as shields. Already Iraqi government airstrikes around Mosul have led to reports of civilian casualties. What if advice and air power alone are not enough to prevent the ISIS from taking more towns in Iraq and Kurdistan? What if Baghdad itself or the cities of Kirkuk or Irbil look threatened?

The militants from ISIS have been causing problems in Iraq and Syria for several months, but then they took control of the area around Kirkuk, a gigantic oilfield; then they captured the Mosul Dam, which controls electricity and might serve as a weapon; and then they encroached on the Kurdish capital of Erbil, an oil boomtown which happens to have a US consulate but also has hundreds of employees of companies like Chevron and ExxonMobil; that’s when the airstrikes against ISIS started. To be fair, it was also when ISIS became especially barbaric, and tens of thousands of Yazidi refugees became stranded. The current US intervention certainly has humanitarian purpose, but it would also be wrong to pretend that oil is totally irrelevant to the larger crisis in Iraq.

Meanwhile, the markets are discounting any disruption in distribution in Iraq; Iraq is currently the world's seventh-largest oil producer, churning out some 3.3 million barrels per day; Kurdistan in the north is only responsible for about 10% of the national production; most Iraqi oil exports come from the southern part of the country, and those oil fields are far away from the current fighting, so it’s highly unlikely that there will be a disruption, at least in theory.

In theory, all oil sales in Iraq are supposed to be handled by the central government in Baghdad, which then splits revenues among the various regions according to an existing agreement. Iraqi Kurdistan has been pushing to sell more of its own oil directly to other countries, bypassing the central government entirely, because Kurdish officials claim that the central government hasn't been sending Kurdistan its promised share of oil revenue.

The United States is officially opposed to Kurdistan's direct sales of oil abroad because it might undermine the unity of the Iraqi government. There's currently an oil tanker filled with about 1 million barrels of Kurdish oil parked about 50 miles offshore from Houston that can't unload its crude. State Department officials have been quietly warning any potential buyers of the Kurdish oil that they could face "serious legal risks." But now, the Kurds are stepping up the fight against ISIS.

Iraq has scheduled to export about 2.4 million barrels per day of Basra Light crude in September, up from 2.2 million in the previous month. Libya has resumed shipments of crude. According to the IEA: "The Atlantic market is currently so well supplied that incremental Libyan barrels are reportedly having a hard time finding buyers." If Iraqi oil goes offline, even for a short time, the rest of the world does not have enough spare capacity to replace that production; that would likely push oil prices over $125 a barrel, and that might then increase the leverage for Putin.

And it had been thought that sanctions imposed on Russia over its support for Ukrainian rebels might cause disruptions in oil distribution. Russia is the largest oil producer in the world, at over 10 billion barrels equivalent per day or 13% of world supply. However, the markets are looking at Russia and saying that Putin needs to sell oil even more than the EU needs to buy it. Russia turning the taps off would cause an oil shock in the West as it would cause a steep rise in prices and significant disruption, however it would also bankrupt Russia. At least in theory.

Ukraine vows to stop Russian-supply convoy unless conditions are met. Wary that the Russians may be trying to move military supplies into their country to aid pro-Moscow separatists, Ukrainian officials said they would not allow a convoy of 280 Russian trucks to cross the border unless the Red Cross took over the delivery. Ukraine says the cargo, which Russia insists is humanitarian aid, must be loaded onto other vehicles by the Red Cross. It will take the trucks about two days to make the 620 mile trip from Moscow to eastern Ukraine.

Ukrainian state-run energy firm Naftogaz said yesterday that the ongoing dispute over natural gas prices between Kiev and Moscow may lead to disruption in Russian gas transit to the European Union (EU) countries. Kiev and Moscow have been locked in a dispute for three years over a 2009 contract under which they agreed to tie the price of gas to the international spot price of oil. In June, Russia's energy giant Gazprom has cut all gas supplies to Ukraine after the two sides have failed to reach an agreement on payments. The dispute between the two former Soviet countries triggered fears that Russian gas transit to Europe may be halted. Currently, around 15 percent of EU gas supplies flow through Ukraine.

Yesterday, the International Energy Agency (IEA) said: "Oil prices seem almost eerily calm in the face of mounting geopolitical risks spanning an unusually large swathe of the oil-producing world." Global oil prices have fallen to their lowest levels in 13 months. Brent crude is trading around $103 a barrel, and WTI is around $97, then 10^th straight session with prices under $100. Retail gas prices have dropped about 23 cents a gallon since April.

 

And you probably remember back in 2008, when tensions with Iran helped push oil prices up to a record $148 a barrel. So, with all the problems around the world now, why are oil prices dropping? The US is pumping the most oil in 27 years, adding more than 3 million barrels of daily supply since 2008. 

 

Supplies from the Organization of Petroleum Exporting Countries, which pumps about 40% of the world’s oil, rose to a five-month high of 30 million barrels a day in July as Libyan output recovered and Saudi Arabia increased production. At the same time, global demand is weak, although it is expected to pick up towards the end of the year. Meanwhile Mexico has privatized its oilfields, at least partially. The state-owned energy group Pemex will lose the monopoly it has held since nationalization in 1938. Mexico’s oilfields had been under-performing and production dropped by more than a million barrels per day in the past few years. So, if we can just hold it together for a couple more years, North America could become energy independent. Until then, it could go either way, at any moment, and send the economy into a tailspin in a heartbeat, at least in theory.