Economy Headed For Tougher Times

[moeman]

I'd probably laugh at a Scottish funeral. Love the accent :-)

[Don Hudson]

Billy Connolly...brilliant comedian, great skit.

[J.O.]

OT I know but if you ever have the chance to see Billy Connolly live, spend the money. You will not be disappointed. I laughed my arse off for close to two hours.

[Lakelad]

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Why U.S. airlines look better than Canadian peers

January 26, 2015 - Financial Post
By Jonathan Ratner

It may be relatively easy to calculate the net benefit of falling oil prices on airline industry profits, but determining the impact on airline yields is much more difficult.

Lower oil prices are often the result of slower economic activity or, in the case of Western Canada, the cause of it. In either case, this has a negative effect on travel demand.

Ben Cherniavsky, a transportation analyst at Raymond James Ltd., noted that U.S. airline industry profits fell in previous periods when economic slowdowns triggered a decline in oil prices.

He also highlighted the importance of the Bank of Canada’s recent interest rate cut, because it came amid a declining growth outlook for the Canadian economy. Mr. Cherniavsky also pointed out that the rate cut caused the Canadian dollar to further weaken, which will lead to higher airline operating costs and lower demand for travel abroad.

“But demand is just one side of the yield equation,” the analyst told clients. “The other is supply, which remains an equally concerning issue in Canada.”

He estimates that average seat miles (ASMs) for major domestic airlines rose roughly 6% in the fourth quarter, and are set to climb another 5% in 2015.

Line the capacity growth against GDP growth of just 1.5% and it is easy to assume prices will fall. And that is exactly what Mr. Cherniavsky has seen happen based on a survey of domestic lowest available airfares.

He said the Canadian market stands in stark contrast to the U.S. airline industry, which has maintained good capacity discipline with domestic ASMs forecast to grow just 2%. The U.S. economy is also outperforming Canada’s by a wide margin.

As a result, the analyst prefers U.S. airline stocks over their Canadian peers. If ASMs were curtailed in Canada, he believes that would be a positive for the domestic sector.

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[boestar]

Here is why gas prices are low. The Saudis want it that way.

http://finance.yahoo.com/news/oil-falls-greek-election-sends-030119435.html

[inchman]

An analyst this morning was saying that Saudi wants oil prices low to punish Iran and Syria for their internal and foreign policies and Russia for supporting Syria and its foray into Ukraine. It also hurts ISIS as they are largely funded by black market oil.

So, while they are a bit medieval in their justice system, the Saudis do take their oversight of the Arab world seriously and are probably helped with some influence by the U.S. (Duh!)

[Fido]

... and Russia...

There are likely a few western countries that are behind this also.

[DEFCON]

So then; is it safe to conclude, supply and demand has little real influence on the energy related costs you and I pay at the end of the day? Isn’t the current crash in oil prices more, or less like any of the other artificially created and maintained bubbles we’ve seen pop? As is the case with the financial shenanigans that plague us, other unappreciated forces, purposely hidden from us I guess, determine how brutal a raping we and our economy are going to take at any given moment in this area of the economy.

[Don Hudson]

In observing history, it is reasonable to assume two rules of international engagement underly any massive shift in policy: 1) That fundamental shifts in market forces, such as a 50% cut in the #1 world commodity, don't occur without "arrangements" and "prior notice" and, 2) Such changes are usually "discipline" for somebody who is not behaving the way the powerful want or perhaps more frequently, need.

Re, "So then; is it safe to conclude, supply and demand has little real influence on the energy related costs you and I pay at the end of the day? Isn’t the current crash in oil prices more, or less like any of the other artificially created and maintained bubbles we’ve seen pop? As is the case with the financial shenanigans that plague us, other unappreciated forces, purposely hidden from us I guess, determine how brutal a raping we and our economy are going to take at any given moment in this area of the economy."

Yes.

[Fido]

Anyone can drive a commodity price higher or lower.

It just depends upon their financial situation and their balls.

[Don Hudson]

Well, the two statements are logically inconsistent because the notion of "anyone" cannot then rely upon a qualifier, "depends". So, strictly speaking, not "anyone". - I sure don't mean to be nit-picking on this point...I'm just trying to sort out the meaning! ;-)

What I know about The Market might fill a small thimble, (and, given that they must first act in their own favour then the client's... that includes, in my opinion, most financial advisors be they independent or the bank's) but in just thinking about it I doubt if even the Koch brothers or the Hunt brothers or some other such "equal" could affect commodity prices in the present manner. It seems to me that the King of Saudi Arabia had that power and perhaps his brother may, perhaps Russia used to, China did regarding steel for a short while and perhaps the Fed in the US, regarding gold. Regarding daily market prices I think you could say if something like the Ontario Teacher's Pension fund sold off a ton of holdings then you'd see a temporary effect, (the kind where insiders make money on the up-and-down), but nowhere near the scale of what we're seeing with the present manipulations.

[deicer]

Don,

Didn't we instigate a long thread about this, oh, way back in 2004 or so which somewhat predicted where we are today?

[Don Hudson]

deicer, I think so...the AEF searchable record goes back to around May, 2003. I've used it a number of times - really great record. However you have to use the "current" selection - the "archive" selection doesn't seem to work, (I may be doing something wrong).

Numerous observers/writers have examined these themes that today are common knowledge. The notion of "profit over people" and the power of giant private unelected tyrannies running the country to suit themselves and their shareholders by proxy and "frontmen" is mostly true even as the expressions themselves may be a bit over the top which tends to put people off. In many places we have a functioning democracy, small 'd', but where and when it counts, power makes its presence known and understood. Not so sure in Canada - Harper is a very odd duck indeed regarding business, (giant corporations). I don't have a sense of his views, in the way that we certainly have a sense of the Republican view across the border. I think that during Liberal governments, business had its way just as much as under Mulroney, (who sang with Reagan...so to speak).

[Fido]

I will predict that in the next 10 years there will be another almost-maybe-couldbe recession again.

[Don Hudson]

"I will predict that in the next 10 years there will be another almost-maybe-couldbe recession again."

Aw shoot, I knew I shoulda just left it alone!

[airt]

There is no question that the Saudi's want a low oil price right now and are making sure that it happens. The big question is why?

[Fido]

There is no question that the Saudi's want a low oil price right now and are making sure that it happens. The big question is why?

Take down Russia and ISIS.

[deicer]

I will predict that in the next 10 years there will be another almost-maybe-couldbe recession again.

Good Morning Fido

You are correct.

The thread I referred to with Don was about the conditions that led to the 2008 meltdown.

Here we are 7 years later and the same conditions exist. The only difference is that the timing of the cycle is shortening.

If all these economic gyrations are so damaging, then why is nothing being done to eliminate it?

It is because upheaval creates profit for the 1%.

In the past, this was accomplished by waging war. Actual combat is not acceptable to the global population anymore, so in a way, you can look at it in the context that it is now global economic war.

Who will be the victors in the end?

[DEFCON]

"Who will be the victors in the end?"

The Federal Reserve banking system & the Rothschild gang?

[boestar]

High oil prices are driven by future speculation. Big players speculate that the price of oil will rise so every one buys it and that drives up the price. Self fulfilling prophecy. Low oil prices are driven by FACT. Saudis increase production and force OPEC members to do the same so there is a glut on the market. The only speculation there is for every to bail and sell which drive the price down. That is where we are now. It is great for the consumer at the pump but bad for certain parts of the economy. for example the oil sands will suffer because that oil is expensive to extract and cannot compete. We have already seen major layoffs from the oil sands.

The side effect here is that some people made ALOT of money and will make alot of money again when production gets cut and the speculators take over and drive the price back up.

In the mean time people will again buy big trucks and cars with big engines because gas is "cheap" and the cycle of supply and demand will continue until someone finds a good way to rid the world of the need for Oil.

[Fido]

McMurray oil is more expensive than a lot of other crude but a lot of it is not as expensive as one might think.

The older mines and Sag-d areas are around $20 a barrel.

McMurray production is more like a manufacturing plant and the fixed costs on the McMurray manufacturing plant has already been paid. They can produce a lot of oil for a small incremental cost.

There are a number of projects in and around McMurray that are happy with the downturn in new infrastructure spending as they can finish their projects faster and cheaper. The refinery at Heartland is one where the project manager has said so.

[boestar]

Well Brent and WTI are in the $45 range right now so that would indicate a cost advantage, no?

[conehead]

That's what it's selling for, not what it costs to produce.

[MD2]

Speaking of "low(er)" oil prices, I believe we also need a Saudi style renegade gas station chain to comparably lower gas prices at the pumps too!

[DEFCON]