William Thien

On Commodities and Interest Rates

Posted on: February 28, 2016

Two of the more unsettling phenomena to which the buying public has been subject for the last decade or more is the false market stimulated by low interest rates and fluctuating commodity prices.

For example, housing prices are falsely elevated when interest rates are low. Prior to the advent of ultra-low interest rates instituted seemingly in perpetuity by Alan Greenspan during the Clinton administration and beyond, the market was more commensurate with wages. But wages have not kept pace with inflation and what could be had for one price a decade ago in terms of a house is now just a shack by the railroad tracks today only a few years later.

Today the FED continues to keep interest rates low with the excuse that the economy is still not stable enough to begin raising rates regularly. The net effect is that inflation is stimulated substantially while real wages remain stagnant or negatively trending.

Another disturbing fact about the poorly managed economy is that commodity prices have struck the buying public substantially. Gas prices for example, though down recently, seem to be seeing an uptick again with an increase in the price of a barrel of oil. The news about the stock market and the economy being tied directly to oil prices suggests daily that low oil prices signify poor stock market performance, that there is a direct correlation and that oil prices must rise in order for the stock market and the economy to improve. What a bunch of BS. They aren’t talking about my economy or that of anyone else I know. That’s some form of economy.

Hold on a minute! Do you mean to tell me that the stocks in my retirement fund won’t perform well if the price of gas is cheap? That’s ridiculous!

Just last year they were saying that the stock market won’t perform well if interest rates go up and that was clearly evidenced at the mere whisper of an interest rate hike.

So, interest rates have to be low for the stock market to perform well but when interest rates are low inflation is stimulated beyond normal, which is bad for the buying public because as we all know, wages don’t even keep pace with normal inflation, let alone artificially stimulated inflation. And if oil prices are low the stock market won’t perform well, either. WTF?

What kind of investment is the stock market if it is no good for the regular investor to get into? If your retirement is sitting in an account that won’t perform well unless you are getting screwed on this end of retirement by high oil prices (hence gasoline prices) and have to pay severely at the pump, and artificially stimulated inflation by the FED which forces the prices of commonly purchased goods as well as big ticket items such as cars or houses to go up unnaturally high, then maybe it is time for the SEC to take a look at the markets because the FED is sure to muck things up if they do what’s right for the public and maybe it’s time for the DOJ to look into the other thing, too. Two industries should not have the entire economy under lock and key. What that means when only high oil prices will substantiate the market is essentially that money put into the market is actually working against you. That’s exactly what that is. If the market can’t withstand a downward trend in oil prices and you have to pay more at the pump just to buoy the market (which is the understated suggestion in all of the financial reporting), then the money you put into the market is working directly against you and it is working against you TWICE!

If you ask me, if the stock market can’t withstand a change in oil prices (the problem claimed this year) and the stock market can’t withstand an increase in interest rates (the problem claimed last year and a problem that is still holding because the FED is scared s-less to even talk about raising rates) then maybe my retirement fund needs put its money elsewhere because that is an indication of a weak investment Ponzi scheme if you ask me.

Each year the market has a new excuse! Interest rates one year, energy prices the next. As I said, the market should not be held under lock and key by just two industries.

One other thing. I just tried to order something online that cost me $3.95 to ship two years ago but this time they wanted $9.95, because the price of gas went up the carriers were saying all that time so they had to raise rates. The price of gas is back down again now. If you are going to use that excuse when prices go up, maybe you should bring your prices back down now, don’t you think? You can lower your rates again. The price of gas is back down again.

Business is one thing. That is something else entirely.

Don’t tell me I didn’t warn you.

Copyright © William Thien 2016

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