Oil: Lower for Longer
We’ve done a little video to try and explain why analysts now expect the price of oil to stay much lower for much longer. It’s a different format than our previous videos, but we think it offers an opportunity to be more informative with a greater impact than some of our other videos.
We’ll be playing around with this idea for a while, experimenting with ways to make it interesting and quick, so please send us your thoughts and any topics you’d like us to cover.
In other news, the Canadian and global markets have been taking a beating over the last couple of weeks. Much of this is tied to an expected Federal Reserve rate hike for the end of December. The rate hike will be unbelievably small, but markets have been selling off in anticipation of it’s arrival.
The “normalising” of interest rates is a hot topic for many. Some American manufacturers worry that rising rates will inflate the USD further than it already has this year. In Emerging Markets the rising USD has meant a collapse in investment while funds flow back to American shores. Proponents of the rise have argued (persuasively I believe) that seven years after a major financial crisis it makes no sense to have interest rates at emergency levels. Long term cheap credit can’t be allowed to continue.
Canada is also getting badly beaten by the continuing falling price of oil and the end of the commodity super cycle. The slowing down of China has meant that there is simply less need for the huge amount of raw materials we have been selling. Prices on iron ore and copper have all been falling with the price of oil.
Canada is also saddled with other problems. Debt to income just hit a new high, while government debt is expected to grow substantially over the coming years while the economy looks to be doing worse.
We’ve been extremely busy in the second half of this year, which has kept us from writing as much as we have in the past. But we will try and be back later in the week with some more analysis on the markets and economy.