Wednesday, March 9, 2016

Oil prices may have bottomed

The oil prices are down from say $100 to $30 and many energy related companies are going to go bankrupt. There is no question about that.

The whole Middle East is in kind of depreciation and the whole resource sector is badly affected, and the resource producing countries whether it is Brazil or South Africa or Russia, and suppose they all are suffering, so we had already some big-big cracks.

I believe it is conceivable that the oil price will stabilize here and not go down to $10, $20, because the same analysts who predicted when oil was at $100 that it would go do $150. They now say it will go down to $10, $20. So who knows.

Nobody knows exactly, but my sense is in the western world which includes western Europe, Japan that I count in the advanced economies and the US, we will have practically no growth for the next 5 to 10 years.

The governments are much too large as percentage of the economy and they are not spending on productive things like infrastructure or education, but they are spending on transfer payments. In other words, they take out your pocket and then give it to my pocket, better out of your pocket into my pocket.