Did The Fed Intentionally Spark A Commodity Sell-off?
The intention here is the bring facts to light so the public can decide.
I’m not quite sure what to believe on how and why oil prices remain more than 50 percent below free cash flow break even for most independent E&P companies. I know for sure it’s not just one reason and is more likely a confluence of events.
Part of the reason oil prices broke new six-year lows is tied to hedge funds shorting equities and pressuring equity pricing through shorting oil. Another reason is the desire of private equity firms to buy assets on cheap and some banks seeking M&A fees. Obviously OPEC policy has a part to play. There is also no doubt that EIA statistics mistakenly leave the impression that production has remained resilient throughout the summer. But the spark that set the ball in motion was the dollar strength as every major money center bank in the U.S. recommended going long EU equities and long the dollar because of further monetary easing in Europe.
Related: How To Profit From Crashing Oil Markets
The inverse correlation between the U.S. dollar and oil prices in June was virtually 100 percent, but that has changed more recently, as I have noted previously. At that time, investors here in the U.S. plowed into biotechnology and technology and went short oil as if they knew what assets central banks were going to buy and not buy based on all the free money from Europe and Japan.
Since the financial crisis began the cozy relationship between money center banks and the Federal Reserve, since the bail outs, is well known. For example, Goldman Sachs’ deep ties to the U.S. government are notorious and, not surprisingly, they led the charge in calls for a downturn in oil. So has the media, as I have extensively documented all year here.
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