Economic crisis looming? Maybe

[Onepoint]

Forget the stock market boom or bust, its being propped up by the fed and is artificial, the real economy is not even reported truthfully anymore. 

Aside from that, I have always kept an eye on energy and food.  Food has been spiking for months now, oil price which is essentially the bellwether for energy has crashed, as of right now its hovering at about 50 bucks/ barrel.   Fracking and domestic oil production is only profitable when its above $70, some say really above $85. 

The main reason we have not have not slipped back into a recession is the oil boom in the oil producing states.  I just heard an oil industry forecast that for the next 6 months, the bulk of the industry is funded in investment, and nothing is really going to change. However the second half of the year  have many investors and oil companies hedging and a near stand still of new production and even shutting production down on some marginal producing fields.  This will be a major hit if the situation does not change soon.  We may enjoy the cheaper fuel, and that will spur some economic activity, but it will not offset what will be lost. (and that benefit may be moot if they pass more fed fuel tax like they are talking about)

Something else that will add to the hit is if the fed has to raise interest, which they have been quietly hinting at just to get anyone to buy bonds for some other revenue source other than monetizing the debt itself.

The future is never certain, but there is clearly a potential threat of a serious economic downturn again.  It may pay to be aware and prep for it.

[jonnyugo]

2016, next corporate shake down.

[panoz77]

Keep prepping if you are and you better start if you're not.

Don't forget that another large bubble to add to the implosion is the 1 Trillion in unpaid student loans.
https://www.google.com/?gws_rd=ssl#q=student+loan+bubble

Sounds like it's about time to get into another MAJOR war to prop up the economy.

Might be a good time to buy a couple of cases of those MRE's that Toad has for sale  (shameless plug).

[Rocketvapor]

MREs?

http://www.mreinfo.com/us/mre/us-govt.-vs.-ebay-auctions.html

Seems to be OK now to sell them just don't send them by air. 
Probably be ready to show a receipt where you bought them. 

[ImTryin]

Forget the stock market boom or bust, its being propped up by the fed and is artificial, the real economy is not even reported truthfully anymore. 

Aside from that, I have always kept an eye on energy and food.  Food has been spiking for months now, oil price which is essentially the bellwether for energy has crashed, as of right now its hovering at about 50 bucks/ barrel.   Fracking and domestic oil production is only profitable when its above $70, some say really above $85. 

Food is not spiking where I live. The wholesale price of corn is down, and we're starting to see that trickle through the economy. I just bought pork loin at costoco for 2 bucks a pound. Also, considering modern agriculture, and the entire farm-to-supermarket supply chain, is heavily energy intensive, lower energy prices remove cost out of every step. That lowered cost will either work its way through the supply chain, or enrich the farmer and the distributor and the retailer, and finally (belatedly) the consumer...

The main reason we have not have not slipped back into a recession is the oil boom in the oil producing states.  I just heard an oil industry forecast that for the next 6 months, the bulk of the industry is funded in investment, and nothing is really going to change. However the second half of the year  have many investors and oil companies hedging and a near stand still of new production and even shutting production down on some marginal producing fields.  This will be a major hit if the situation does not change soon. 

A lot here: the notion that the oil industry is the only thing keep the economy afloat is questionable. Other industries like agriculture, automotive and technology, and a myriad of service sector entities are also doing quite well..
It's important to note that yes, the oil industry is large, but it is absolutely dwarfed in terms of GDP, by businesses large and small where oil is only a cost center, and not a profit center.

We may enjoy the cheaper fuel, and that will spur some economic activity, but it will not offset what will be lost.

Care to reason that one through?

Like I said, the portion of the economy not directly tied to energy exploration and  extraction (downstream energy entities like refiners actually make more margin on cheap oil) is absolutely dwarfed by those that aren't.
Also, Oil and Gas, while huge entities are not particularly high margin entities..

So we have the situation where the average joe sixpack has an extra 75$ to 150$ rattling around his wallet every month, and that money that would have been spent on gas can now be spent on a new gun, or an iPhone, or a restaurant visit: all businesses with much higher margins than oil.

The future is never certain, but there is clearly a potential threat of a serious economic downturn again.  It may pay to be aware and prep for it.

That, of course, is never bad advice....

[Onepoint]

Food is not spiking where I live.

Bread, milk, beef as well? Over all food has gone up significantly in the last few years. Sure you will find some that is relatively low, but even pork was about a buck a pound just a couple years ago, as was hamburger.  Chicken seems to have not jumped as much, here anyway, but still I don't think its arguable grocery cost has risen significantly.  And it may come down if the fuel price falls, although diesel has not been falling quite as much as gas.

The notion that the oil industry is the only thing keep the economy afloat is questionable. Other industries like agriculture, automotive and technology, and a myriad of service sector entities are also doing quite well..

I can guarantee take away all the oil boom, and it would be road block to any economic recovery, especially in the western states.  Refineries only make money selling, if there is enough on the market they can't sell for the set cost they start to dump overhead, just last night on the news a local refinery announced it laid off 6 people already. Cheap oil and supply surplus is not a boon to the industry in any way. 

Ag has done well because of some unusual circumstance, major storm a couple years ago killed a lot of breeding cattle, combined with drought in other regions and sell offs because of it have left cattle numbers lower than they have been in quite a while, spiking prices we have never seen, but that too is a bubble. 

Grain crops come off of record highs and low production the last couple years,  this year had a bumper year, and prices plummeted, contracts are much lower for the coming year and so will incomes. 

Joe 6 packs extra cash will be gone fast enough if he was employed anywhere related or influenced to the energy industry, things like trucking?   The increase of trucking in the whole western region of the country was related to the oil boom, even if not directly, if only for hauling gravel and infrastructure improvements because of the traffic.  Construction?  People being laid off, or working reduced hours are not going to be buying houses.  Automotive? They sold a lot of them last half of the year, but that's credit, not cash, which is fine so long as everyone is employed.

Tech has been relatively strong out here, but still not enough to take up the slack for heavy industries.   I suppose it all depends in how long the lag is in between the oil  divestment and employment, and if the oil bust remains or worsens.  If oil stabilizes at 50 or less, its going to mean trouble IMO.

 But if you disagree, what sector  has led more of the recovery of what would have been a recession last year?  Govt jobs?

And I am not saying it will definitely happen, there may be unforeseen circumstance that changes everything,  but last year was a boom in many ways, its likely to bust just from what I see happening the last quarter of last year.  You can come to your own conclusions.

[rich]

Food prices,  ugh...  If you don't think they're up you must eat out alot.  There's not many items you can buy at a grocer for under $3.

[ImTryin]

What industries are bigger than the energy sector.. Well there's healthcare, technology(a literal order of magnitude bigger), automotive, agriculture(same as tech, a literal order of magnitude bigger) and defense.. To name a few...

We are the largest oil consumer in the world, consuming even more than we produce, even with all the gains in domestic production. Money spent on energy is red ink baked into every good or service, produced and distributed, that is not directly tied to energy extraction..

And the value in terms of GDP of these goods and services, and the employment produced by these goods and services absolutely dwarfs anthe oil industry...

Yes, it might be bad for 6 bubbas in bumfarkistan, but for the vast demographic majority in suburban america, and the businesses they operate, its good.

[Onepoint]

But what sector has grown more?  Where is the bulk of jobs coming from then?

And we don't use more than we produce anymore.

http://www.eia.gov/tools/faqs/faq.cfm?id=268&t=6
"Since May 2011, the United States has been a net exporter (exports were greater than imports) of refined petroleum products. The volume of net exports of U.S. refined products in September 2014 was equivalent to about 10% of the total volume of U.S. petroleum consumption in September 2014."

If what you say was true, we would have a fuel shortage.

[ImTryin]

Look again: Net exporter or refined products... Not of crude....

Logic fail on your part: that has nothing to do with a fuel shortage, which we would have if we didn't import additional crude oil on top of what we produce..

And think about that for a second, considering that we export refined products, again where the base product pulled out of the ground represents red ink and not black.. A low price is actually good for that aspect of the industry

[Onepoint]

Point taken on crude vs refined. However the increase of money staying here and trickling out rather than going over seas is not insignificant, nor is it net loss.  Only the import is net loss.

And Oil production like any other economic aspect is not simply number of  roughnecks hired, there is systemic spread of money through the communities, just like it does for any other industry, a sudden stop to that and it will have an impact.

again where the base product pulled out of the ground represents red ink and not black.  A low price is actually good for that aspect of the industry

Tell that to the Refinery workers that are out work, I bet they would love to know they are better off.   Like I said, that only works if the demand is high the demand is slackening, export for a lot of things like natural gas is lower return.


We added 2.5 million jobs last year total, how many were in or related to fossil fuel energy production? Even a 10-15% loss is not insignificant. 

Like I said draw your own conclusions.

[Carl in CT]

It sure doesn't feel like we ever pulled out of a recession to me. I don't have the info you guys do so I'm not going to hop on one side or the other. I just know my grocery bill has gone up over the last two years (until I found the Aldi store nearby), my house value continues to slide, services cost more, my property taxes are up, the list goes on. About the only thing that is down is gas and that's a huge help to me right now. I hope that doesn't somehow hurt the overall economy in the long run.

Last year a gallon of milk at the corner store was often on sale for $2.49, now it's $2.99 on sale and it is $3.99 in the big grocery stores (Stop & Shop, Big Y).

What is saving my bacon here is the Aldi stores that have popped up. Milk is $2.49 a gallon every day there, eggs are $1 per dozen less, coffee is a lot cheaper, etc. They are small stores and their limited meat and produce I don't bother with (I go to the local butcher for meat) but I can walk out of there with a cart full of milk, eggs, butter, half & half, coffee, OJ, bread, Greek yogurt, cereal and even a good amount of gluten free stuff for my wife for around $150 instead of $350 at Stop & Shop or Big Y. Aldi is even cheaper than Wal-Mart groceries.

Like I said, meat and produce we get elsewhere but a lot of the common stuff we use every day can be had at Aldi's much, much cheaper. It's off brand stuff but I don't care if my cereal says General Mills or Bob's Cereal on it. As long as it's fresh and tastes about the same. My point is, if not for Aldi's my grocery bill would be up quite a bit over the last few years and I really don't feel like we are having any economic recovery, at least not where I live.

[Onepoint]

Economies are regional and they conglomerate to make the national. I'll acknowledge energy production may not be big deal in some areas, but it is out west.  Where as the drop in goods production and job loss never had the impact out here it did back east, or the tech crash did on the west coast.

[Onepoint]

Just  passing this on,  ran across as story that quantifies some of this stuff,   

 "$1.2 trillion in gross product each year, including multiplier effects, and over 9.3 million permanent jobs.

"When you include the ripple effects through the economy, oil and natural gas exploration and production supports nearly 7 percent of the U.S. economy,"

http://www.cpapracticeadvisor.com/news/11674995/study-oil-gas-industry-creates-93-million-jobs-in-us

[Lostinspace]

I read somewhere this past week that one of the major banks, (I think it was JP Morgan Chase but not 100% certain) added over 8 MILLION ounces of physical silver to their vaults the last 10 days of April and has nearly a billion $$$$ in physical silver now and they're adding like crazy.  I read another report yesterday that said silver could double or triple next year and that a lot of banks are adding it as a hedge against what is coming.  Many "experts" are predicting something next year.  My ear to the ground has me pretty concerned about next year as well as it is the election year and I'll just leave it at that for now.  I'm not advocating running out and buying tons of silver, what I am trying to say is that there are a lot of preparations going on in the financial industry and other "areas" that are screaming that "the people in the know" are preparing like they have never done before.