Here Comes the Triple Whammy
If you pull up a crude oil chart (or USO, the popular oil ETF), you will quickly see that oil has already worked its way through a multi-month bottoming process.
But to really understand how the energy markets will respond to a collapsing dollar in the longer term, letÂ’s take a look at a 60-minute chart of the United States Natural Gas Fund (UNG:NYSE) .
When news hit the wires of the Fed’s trillion-dollar printing spree recently, natural gas jumped like a scalded cat with boiling hot water poured on its back. It took oil and gas traders a time span of roughly two seconds flat to realize that if the Fed and Treasury are well and truly going “all in” in terms of printing money to save the U.S. economy, the nominal price of dollar-denominated hard assets should shoot up like a bottle rocket.
China’s recent remarks, and the reality of America’s fiscal situation, mean that the dollar has a lot – and I mean a LOT – further to fall. We’re talking journey to the center of the Earth here.
It may well be in fact, too, that many paper currencies have troubles ahead, as country after country engages in a “race to the bottom” in an effort to monetize debt and shore up export sales. But, as we have said repeatedly in these pages, nobody but nobody does it bigger or better than Uncle Sam... and that includes unleashing weapons of mass currency destruction by way of the printing press.
This is great news for gold and silver. But if the period of paper currency debasement comes against a backdrop of global recovery in emerging markets, it could be even better news for hard assets like oil and gas and copper... and hard-asset PRODUCERS like Norway, Australia, Canada and so on.
The potential “Triple Whammy” is an explosive cocktail composed of the following three factors:
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Hard assets rising in price as the result of extreme paper currency devaluation.
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Oil, gas and metals being repriced upwards to reflect economic recovery and renewed global demand.
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Supply constraints, bottlenecks and peak oil concerns coming back to the fore with even more vengeance than before as a result of production cutbacks and outright shutdowns due to the credit crunch.
If we get just two of those factors working in concert, oil is on its way back to triple digits. And if we get the mojo of all three working at once? Whoo doggies. Crude could be back at $150... or even $200... before the decade ends.
And Yngve Slyngstad could well have a big smile on his face as NorwayÂ’s investable assets soar from $300 billion to $400 billion... $500 billion... or even beyond.
The looming “Triple Whammy,” in other words, is absolutely fantastic news for the “hard asset” economies – countries like Norway, Australia and so on – that make their bread and butter from hard assets: stuff like nickel, uranium, iron ore, and of course, oil and gas. That means serious upward trajectories for their currencies too.
Which finally gets us around to...
$14.23 (04/13/09)
