Central Banking 2014 Upgrades & Arab Uprising Part II

Good evening to all

The month of July has been rather amusing in market volatility and global economic indicators balancing out each other, mixed in with the typical political cocktail of civil unrest.

ECB and Bank of England Harmony

 With the markets losing some of the power and confidence in tactic decision making, today they looked to the words of Mark Carney (Bank of England) and Mario Draghi (ECB). The Outlook of both and interest rate decision remained unchanged, though new weapons such as market guidance are becoming more weighted on market volatility.

A Central bank’s words are one the most secretly kept letters before an announcement, as these words are the recurring power mover of any market. Previously a central bank would never try to give their opinion on forward assumptions of market growth, though the new Bank of England governor changed the norm.  So these words are now a typical aspect for market makers to expect in the medium term.

Liberalisation of the ECB was also in discussion; the idea of releasing the minutes of the ECB, could be seen as a more accurate way of the market valuing the future. Though in the Gothic economist’s opinion this will only produce more wild fire, and take less value of the central bank’s overall decision.

Vertigo Markets

So with the last month being pinned to fallout part 2, of the financial crisis shows that the wounds slowly are healing, for now... The patient is still in intensive care.

The redbull juice of quantitative easing, unfortunately could be working. Grumbles for the Gothic economist, as his positive monetarist views against Keynesian borrowing malarkey as being the devils work could succeed, as the S&P climbed today. However... These growth patterns with an over capitalised market, may bring future worries, to the mix.

Today the US market saw growth patterns that had not been seen since 2011, amongst these positive movements, there has also been frailness at the midpoint, due to fears of reduced growth within in china and liquidity worries for domestic and medium sized businesses.

The Brent crude benchmark has been on rapid brinks of decline and ascension. The Chinese downturn in GDP forecast, and the US growth results have been players on this. Since July continuing into August has seen many Middle Eastern civil problems affect oil output, and with US sanctions on cutting Iranian oil exports have been also implemented this week. Hence this fall going into the winter season for the northern hemisphere could see prices above $112 a barrel.

Positives that can be seen are controlled inflation position within Europe and US, also boosted exports in some of the sovereignly constrained Euro zone countries.

Burn Baby Burn

The Middle East and North African political process is still far from maturing in stability. With Nigerian tensions, the Egyptian political problem and summer maintenance schedules, the fall could haunt the price yet.

Libya has been flooded with protests and shut down of its ports, leaving the OPEC state with no oil and in some cased more than 50% fall in refining, giving August and September contracts a rise.

The markets could possibly become more active in their discontent with the Arab uprising, as foreign direct investment thoughts to Africa becomes less desirable.

The biggest problem is that due to these cuts in production, you cannot stop oil extraction straight away, so all you can do is flare. The burning of fuel in some parts of Africa have forecast to total over $100m a month, and with Flaring already being a major issue within Northern Canada, more investment and maintenance is demanded within the Oil & natural gas sector.

This week saw oil spills in Thailand, Nigeria and evidence of manufacturing faults with an Exxon pipeline in Canada. Enough said on future prices and environmental damage.

Closing Black Words

The energy sector will continue to climb, as middle east tensions are predicted to continue , if  US continues to give out low unemployment data and growth support. Though this highly unlikely, and in the fall, markets will become more volatile, as the deadline for the US borrowing limit comes closer.

Buy while you still can...

February Gothic Viewpoint

The far outcries of a weary Britain’s Triple – A downgrade, and the far reaching wails of a Banshee that stay echoing with a once dominant oil giant could be the marks of February 2013, which Economics nerds remember.

Apart from that the dear lust I have in returning to the desolate sector which I call short-term trading. Research and hunger for a weakened Sterling drives me into vast array that this is 2013 and yes people need to be proactive in objects other than chess, in order to survive the Darwinian rules of life.

Iran goes Keynesian

For me, yes I will remember it for these two things, plus Iran’s new adventurous plans for 20 new uranium rich reactors.

Iran’s strategy of its announcement on the new nuclear reactor plans, may pay off in the long term. The strong decisions that Iran will not back down, regardless of international pressure on its nuclear programme as a known Islamic radical state, could pave the wave for new balance of payments to enter the country. Looking at in terms of the size of Iran, one could easily assume that Iran will have a power production surplus in cheap electricity, which could be provided to an oil dependent power consuming gulf.

As much as its nuclear programme is seen as a major threat to Israel and other nations, it could bring forth a new frontier of gulf power. Iran could enrich nuclear weapons, but instead it is taking positive approach in order to combat economic sanction bestowed upon them.

Wireless momentum

At the moment there are two groups pushing forward for one next big thing in world electronic devices. The ability to charge battery powered devices wirelessly from the handheld mp3s and smartphones, to the 12V battery in your car. The ‘Wireless power consortium’ and ‘Power matters’ alliances are the two big groups pushing this forward and competing. A future billion € industry that will maybe see the combination is well with wireless signals in order to keep the spectrum of signals generic and together, as the invisible spectrum gets more and more stuck together.

Only Fools and horses – The Long view

Well apart from the horse meat scandal. Some other people have silver lined their pockets in an array of marvelous moves within the economy.

As the currency attacks become far greater on central banks, deemed by hedge & Pension fund managers as being the new innocent flesh to be cleaned from bones, a sudden eye takes a glimpse where does it go from here?

Well with dilution in the power of central banks, the multiplier effect of virtual power transfers over to the hedge funds at a smiling rate, as they know after the submission of Bank of England to the new round of QE, they will easily take bets on world recession part II.

The Gothic Viewpoint

The central bank may take an extreme monetarism approach to curb the economy as economic collapse may look inevitable, pressing the political side of the coin in to reduce tax receipts in the short-term, in order to reduce the downturn in a rise in central bank interest rates. The proposal seems more to create a wave of laughing amongst some readers. But think of Europe in particular, what options are left before part II is not prophecy anymore?

So the Banshee has not given up yet haunting the tickers at the world indices and another wave of gothic worthy financial depression I may get to rant about. But one thing is for certain, that humans do become innovative, and are able to find ways to adapt to constraints. Well that’s the nice way to put it… now to listen to Rome!

Tata

Gothic Economist