Zeits: A Dead Cat Bounce? Drudge Report And Product Placement -- February 3, 2015

This is really quite funny. At an earlier post I have a photo of our granddaughter telling me the rising price of oil is a "dead cat bounce." Literally moments after posting that photo, Don sends me the link to a new article by Richard Zeits over at Seeking Alpha in which he (Zeits) asks the same question: whether we've reached an inflection point or whether this is a dead cat bounce? At the link:

The correction in the price of oil has entered its sixth month. I count the correction's duration from early September of last year, the moment when key waterborne crude price benchmarks dropped below the lower end of the stability band that had existed since approximately late 2010. The economic pain signal to producers became particularly acute after the price collapse following OPEC's November 27 decision to keep production unchanged.

The time period since OPEC's announcement is probably insufficient to produce a supply response that would be already visible in industry statistics. However, given the magnitude of the price decline, the response mechanism has been set in motion and at least some correction to the previous trajectory of supply growth is now inevitable, in my opinion. Moreover, as I have argued in my previous notes, once the supply response to the price signal sets in, it would likely last for some time and would not be quickly reversible.

Therefore, the extreme price signal - and I view the sub-$50 price of oil as extreme, given the industry's cost structure - at some point will no longer be necessary, even if the market remains oversupplied on the backward-looking metrics.

The article is excellent. It is very, very long. The article will be archived for subscribers only in the near future. 

************************************

Product Placement

Pundits often mention Matt Drudge's uncanny ability to link articles to frame an agenda.

Seldom mentioned is Drudge's uncanny ability to sublimely place links to frame his agenda.

Here's an example for newbies.

Below is a story of an aging superstar with wrinkles, cataracts, and a penchant for salad.

And above that link for that superstar is a link to the world's oldest active presumed presidential nominee.