Thursday, July 28, 2016

The dollar is back to make everyone butthurt.

The election is distracting everyone from the real things going on in the world.  The oil market right now is a wee bit frightening. Record levels of oil - otherwise known as "the glut" didn't matter when the dollar was weakening from January to May. During that time the price of a barrel of oil increased about 40%.

Around the beginning of July the dollar reversed and is now getting quite strong again putting pressure on everything. Oil is bought in petrodollars, and when the dollar goes up - other countries can not buy as much of it. Or if they do it takes more of their resources to do so. A strong dollar also makes it harder for US exports. That means our companies sell less. Rinse lather repeat.

So - the dollar gets strong which makes the price of oil go down. A lot of drillers that were holding onto their fingernails won't make it. I read a couple of days ago that a record 23% of high yield energy bonds were under threat of defaulting. That is a lot of percent.

With the way the world looks - no one can predict how strong the dollar will get because no one can predict how horrible the economies of the rest of the world will get.

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