Record February Gas Prices Mean It's Time To Blame The Hedge Funds Again

Discussion in 'Economics' started by Tsing Tao, Feb 13, 2013.

  1. Tsing Tao

    Tsing Tao

    As the AAA chart below shows, the gasoline price is now higher than it was a year ago, and has been for the past two weeks, which also automatically means it is the highest it has even been in history (naturally, the implications of this record high gasoline tax on the cash-strapped US consumer are painfully clear).


    So with gas prices once again "an issue", it is time to trot out the worn out scapegoating usual suspects - those evil, evil hedge funds, whom everyone is perfectly happy to blame. Or at least pest exterminators and cab drivers. From Reuters:

    Of course, what the exterminator and cab driver fail to understand, or just are happy to ignore, is that the same hedge funds that merely allocate the Fed's virtually "open-ended" excess liquidity into stocks, which are now beyond furiously overvalued by any benchmark, and which as we explained over the weekend are trading at a higher forward P/E multiple now than they were in 2007, have increasingly few choices where to park their money, and even with the threat of the Margin Hiker in Chief sending CME margins to 100% across the energy space, sooner or later, those $85 billion in fresh monthly liquidity will go into Brent, WTI, and of course, gas.

    However, while everyone is happy when stocks surge courtesy of what little 401(k)'s are left, , very few benefit from soaring gas prices. Which is why the exact same mechanic that has sent the Russell 2000 to all time highs, is responsible for a record high gas price for this day in February. But apparently the logic is too complex, and blaming Bernanke for the same outcome as surging stocks, is a little too convoluted for most. Or at least for one pest exterminator and cab driver.

    Ironically, the hedge fund against these accusations makes far more sense, than the blind and idiotic scapegoating of Bernanke's ruinous policies on those who merely serve as a the liquidity conduit implementing Bernanke's policies:

    Yet none of this matters to the Micro Manager in Chief who wants his Dow 32,000 cake as well as eating $0.00 premium too.

    And while it was out of control, runaway Brent and gasoline that forced the Lehman collapse in 2008, and with it set off the biggest deflationary episode in 80 years, this time the fuse is far shorter, and will likely come out of China, which when it comes back from holiday and preps for the spring and summer "growth" season, will realize just how hot all the inbound money truly is, send Chinese inflation spiking and just as in the spring of 2011, spoil the party for the "developed world's" central banks once the assorted riots start breaking out as they did in the late spring of 2011, leading to the ECB hike, and various other immediate liquidity tightening processes. Because this will not be different.

    But in the meantime, let's all cast the blame for soaring gas prices with the hedge funds, and not where it truly resides: Ben Bernanke, and an administration whose only goal is to push the stock market higher irrelevant of how the underlying economy is actually doing.

  2. Valiant and thorough attempt Tsing, but ultimately pearls to swine.
  3. Tsing Tao

    Tsing Tao

    You are absolutely correct. Sometimes I don't know why I post these things, when most of the audience either lacks the horsepower to comprehend it, or refuses to believe in it.
  4. how do we escape the cycle?
  5. Rona1d


    Can we really cast all the blame on Bernanke? Historically speaking, rising equities signal an eventual improvement in the underlying economy. Unemployment has been falling, firms are seemingly less reluctant to invest, and if not for the pending sequester, the U.S. is well on its way to recovery. Bloated financial markets are an issue, but its not fair to say they're the result of Bernanke's wrongdoing.
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  7. sumfuka


    I don't know about recovery, here in Boston there is a homeless person almost on every corner of every street. And we are not really blaming Bernanke, we really are blaming Greenspan; but he ran away already. So... It is what it is.