Investors should have lapped it up: Friday’s US jobs figures neither too hot nor too cold. The US recovery appears to be on track but it is tentative. The icing on the cake: Janet Yellen’s statement that there was still considerable slack in the US economy and labour market, implying the Federal Reserve would continue a highly stimulative monetary policy for the foreseeable future. Surely a Goldilocks scenario! The S&P duly jumped to a record intraday high, flirting with the magic 1,900… only to go into sharp reverse in the afternoon to end the day 1.25% lower.
So what went wrong? Quite simple, really: Investors know that US stocks are vastly overvalued and the bull run is turning into a melt-up. Or as John Lee described the “curse of the market” in today’s FTMoney: ‘Peakdrift’. A MUST-READ
It appears ‘Goldilocks’ is losing its shine. Pinkers recommends a trip to the nearest Toni & Guy – pronto!
“The US appears to be the main beneficiary with large deposits and analysts have forecast that the world’s largest economy could be energy self-sufficient within 5 years. The end of OPEC and the dawn of a a new era of limitless supply of hot chocolate? Of course, not. The issues and mostly unanswered questions surrounding shale extraction are by far more complex: Different types of oil for different uses, distribution (construction of pipelines), refinement (most refineries in the US are OPEC owned!), political and environmental concerns… to name but a few.
Last but not least, when it comes to ‘miracle solutions’, the old adage applies: “If it’s too good to be true, it probably is.””
This was the Post entry dated 1 January. Today, with the headline “Estimate of shale gas reserves may just be hot air”, the Times reports that “A long-dead Dutch petroleum engineer may be to blame for vast exaggerations in America’s shale oil and gas reserves…” According to the article, energy companies have for decades used a flawed formula to calculate potential reserves.
Well, we all love a miracle… until the spell is broken.