The cheap oil has drawn attention of a lot of investors. Many of you including me think that an oil price of 30-35 USD is just a temporary dive and in few months an investment in oil will yield considerable profits. Commodity investments are not that easy as they can look like though.

Consider this: When we buy stocks, either directly or through cheap ETF, we can kick back and wait until everyone else is going to see value of them and the price will fly high. The commodity investment, however, has an additional factor that affects market heavily – contango.

It seems like the global economic slowdown reached all corners of the world already. Situation is unique. Both recessions 2000-2001 and 2008-2009 had a ‘green island’ that drove the world demand up. Today you cannot see any country being a global demand savior

FED forced banks to save shale companies

According to informants from two independent sources Dallas FEDs met with banks’ officials. Reason? Their exposition to fracking companies’ debt. Amount of unpaid balance booked in their accounts can be as high as 18%. This is just a beginning of an avalanche. When debtor stops paying instalments bank can initiate proceedings to state that debtor is bankrupt. Bankruptcies in energy sector would alarm investors and make it harder to get capital for further operation, which already is in the deep red.

Production crash in the US then lowers supply of the crude oil and increase price of energy resources. The US policy assuming hitting Russia with cheap oil can seriously backlash and burst bubble in the corporate bond market. To prevent that the FED most probably ordered banks to hold their bankruptcy filings regarding energy companies. Creditors are supposed to receive capital through sell off of debtor assets. The FED promised to help banks in case of situation worsening i.e. banks could not get their hands on money.

Crude price only knew one direction since mid-2014 – down. Until now oil lost 70% already. Previously when oil was losing 10-15% OPEC and Russia had been limiting production to stabilise the price. Today no one is thinking about slowing production as no one wants to lose any more dollars.

Low oil price is a product of a geopolitical game. The US government tries to break Russia and Saudi Arabia counts on crippling competition from shale gas sector. Cheap crude is putting financial sector at risk. The very same sector which was eagerly financing production for very long time.

Time has come to prepare this year’s forecast.

Unprecedented increase of supply of currencies and zero interest rate held for nearly 7 years inflated many bubbles: starting with stock market, real estate and the incredible government debt bubble.

What surprises is the fact that Richard Fisher – former Dallas FED President – in the interview for the CNBS openly stated that blame for the latest falls in stock market cannot be assigned to China but rather the FED. He continued that when he was a part of the Federal Reserve they pushed for big boom market to create an image of economy rising and what can be seen now is just a reverse of this artificial intervention. The difference with today is that the FED does not have more ‘ammunition’. He also added that that we should not be looking for any FED officer taking the blame for what FED did.

In the last days we have seen chaotic movements in stock markets. Indexes experienced falls all over the globe. Phenomenon which got my attention was one that I explained few months ago in one of our webinars.

The blueprint I am talking about lets you distinguish between a serious slump and just a temporary correction.


The year 2015 will be remembered as everything but boring. Politics, finance you name it, we had a lot happening at every corner. Consequences of superpowers starts to creep in to the streets. Problems that began in 2015 did not find their end before year ended. What we can expect is that 2016 will match its predecessor. Before that happens let us take a closer look at things that hit or should have hit headlines.




According to my tradition I present you with an account of the forecast I made one year ago. Eventually everyone can write his/her own predictions and forget about it in few months.

Here no one takes prisoners. Forecasting is not an easy task but if one wants to be in this business a healthy reality check is there to stay. This document I divided in two parts just like I did with forecasting – geopolitics and financial assets.

Written in italics is my forecast and regular font presents the follow up comment.

Let us get to work then.