Articles
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Gold Continues to act as a Safe Haven as Energy Still Pushes the World around except in the U.S
Unless oil recovers enough to be reckoned as “stable” by other elements in the investment community, there will be trouble in the equities.
This is because if oil remains low there most likely will be a special factor driving it down – weakness in the other two big economic regions beyond the U.S., namely Asia (China/Japan) and the European Union.
The United States economy can muddle through the downturns of the other two sectors for a variety of reasons, but it cannot possibly take up all the slack in activity. (In fact, the current scenarios playing out around the world favor show a likelihood of U.S. predominance economically for some time. But that is a long discussion for another day.)
It has been presumed that weak oil has hurt American stocks because energy jobs were lost, machines weren’t constructed and sold, and transportation was underutilized. Indeed, that was quite accurate. Was. However, those enormous effects have washed through the U.S. economy now and we have reached a different, if not quite new, “normal.”
The other two regions mentioned earlier have not and cannot reach that kind of normal because they have no energy industry to speak of, except for coal in China and alternative fuels in Europe. They are mired in lower growth and therefore in lower energy consumption regardless of who is pumping the stuff out of the ground.
The U.S. is increasingly taking care of its own needs via domestically produced oil and gas. So, in a market hypersensitive to price, more domestic energy is on the U.S. “shelf,” so to speak. In these strange times that means more revenue stays at home, more taxes can be levied, even if price is low. Consumption of U.S. product is steady-to-up.
In a nutshell, because of the domestic energy card, the American economy is substantially insulated from volatility in price and gains most benefit from homegrown production.
A purported deal among OPEC and a few other energy producers – Russia and Brazil come to mind – has not materialized.
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