The United States is typically a very self-absorbed nation. As the largest economy in the world, and separated by two oceans, US based news and the opinions it shapes have always been centered on domestic concerns projected out into the world. This has only been exacerbated by the a pathologically self-absorbed president.
Because of this problem, the simple fact that the world is fleeing away has escaped many Americans. What has been a growing practical reality as the US share of the world economy slips is becoming a necessity thanks to severe foreign policy mistakes, all of which cater to a domestic audience. “All politics is local” remains true, even though it clearly should not be.
The two biggest foreign policy areas, a trade war with China and sanctions against Iran, appear to be two different situations with the US at the center of both. They are not, and increasingly will become less and less about the US. This simple fact is going right past us, too – making our policies even more ridiculous and harmful to our own interests.
One critical issue is absent in this election year. Well, actually all critical issues are absent, but that’s another point. This time around absolutely no one is talking about one thing that has dominated US politics since the early 1970s – the price of oil. Gasoline is cheap and everyone is happy.
Everyone, that is, except the oil and gas industry. The crash in oil prices in 2014 has confounded the business of drilling, baby, drilling and left oil prices if anything too low – a concern if your job is to make the bubblin’ crude come out of the ground.
It’s been a mystery since the crash just where oil prices will finally land. Today, however, most experts finally agree – we are probably right now in the range that oil will stay at for at least the next year, if not beyond. That’s great for the US, but terrible for other oil producing nations.
Why should the stock market move in tandem with the price of oil? If you’ve never before heard that it has been you may think that the world really has gone crazy. Of course, you might be right.
But the phenom has been so strong and so enduring, lasting nearly two months now, that it’s more than a bizarre intellectual exercise – there’s a lot of money at stake. So what’s so important about oil going up that it drives the market? And how long will this keep up?
There are a few good theories out there for the first question, none of which make a strong case for when this relationship will break and we’ll go back to “cheap oil is good”. But there may be an even simpler way to look at it which tells us that the current situation can’t hold for very long at all.
“Never forget that the stock market is just a market for stocks.”
– Herman Miller, an old accountant I knew when I was a kid
The bloodletting on Wall Street may have paused, but no one is taking any chances. We’re not technically in a bear market yet – the S&P500 would have to break its resistance around 1863 before that happens. But the world is braced for it. Morgan Stanley has told its investors to hold on at least into the third quarter – exactly what Barataria said a few weeks ago.
Why all the negative sentiment? After all, China’s loss can only be our gain if you believe what you hear in politics. Then again, investors aren’t that gullible. It’s one big financial world and what goes ‘round comes ‘round. While there are some good reasons to take a six month or so pause, most of the reasons for this downturn are indeed lousy. It’s time to run through, and over, these arguments.
Welcome to 2016 – when the actual election starts. It would be easy to say it will be the news story of the year. But as important as it will be a bigger story is developing, as it did in 2015.
The conflict between Sunni and Shia Islam is more than a millenium old. It resonates today because the region is emerging, as so many other developing nations are, away from the thumb of Western influences.
It’s not our fight – and we can probably only make it worse. But it will be hard to stay out of.