One of our James was formerly working in the oil industry. His trading performance since he joined us has been exceptional and he is doing very well and is now on a funded account.
However, as every trader he is also facing some roadblocks and issues and he felt like he was drifting off a little. Then his Mentor Marc advised him to dig a little deeper on his analysis and do more research with his pairs so he is more confident.
Here is an article he wrote in our forum which is quite interesting as he takes a dive into US Oil and inflation. James in his own words below:
In the past few weeks, I’ve not been making the trades I could have and missed out on a lot of pips. I’ve been informed to get back to what brought me success, one of these things was doing deeper analysis, so I’ve went back to it.
Below are my opinions only, hope they help but please don’t take as gospel. It more for myself to start looking into things deeper and posting it on here keeps me honest.
Dive into US Oil and inflation
With US inflation numbers coming out again this week I’ve been taking a dive into the theory that its from oil prices. I’ve previously worked in the Oil industry for a long time and seen high and low oil prices but never seen these levels of inflation, so I found it strange.
I’ve placed the Oil price and Inflation on my Trading view chart using percentage increases to check for correlation over the years. Basic correlation doesn’t equal causation understanding in place I wanted to get a bigger picture.
What you can see even in the period back between 2011 – 2014 we never witnessed the peaks in inflation like we see today but the oil prices were similar. I also checked the price at the pumps and during this period we could see the price at 4 USD. This time around we have seen spikes above the 4 USD, spiking at 5 USD but not enough to cause the inflation spikes in my opinion.
Looking at the chart it looks like correlation was broken around March 2021, A quick google search shows me this was when the stimulus checks were sent. Like the video Marc shared a few weeks back, the only people who can cause inflation are the people with the money printer.
Basic conclusion really isn’t much difference from Marcs, don’t trust what the government are telling you and inflation is more complicated than just price of oil.
So, if inflation is more than just Oil prices effecting goods, what risks do I see coming up.
The US are passing a few bills at the moment that they say definitely wont effect inflation so that was the first red flag for me, one is named the inflation reduction bill hmmmm.
Economists have warned this can affect inflation but maybe not in the way they intend, also the tax increases put in place to assist pay for it could also cause put added pressure on households.
Found this clip amusing
“Democrats claim the latest version of their tax-and-spend bill, the mislabeled “Inflation Reduction Act of 2022,” will ensure the wealthiest Americans and corporations pay their “fair share” by closing tax loopholes and boosting IRS funding, all without raising taxes on anyone making less than $400,000 per year. However, analyses from nonpartisan experts show the legislation would raise taxes on low- and middle-income Americans during a period of declining GDP and high inflation; raise taxes on manufacturers, exacerbating supply-chain disruptions, and costing U.S. jobs and investment; and do little to nothing to lower inflation.”
“The more this bill is analyzed by impartial experts, the more we can see Democrats are trying to sell the American people a bill of goods,” said U.S. Senate Finance Committee Ranking Member Mike Crapo. “Non-partisan analysts are confirming this bill raises taxes on the middle class, raises taxes on manufacturers, and produces no meaningful deficit reduction when gimmicks are removed and the full cost is accounted for.”
The second bill was for the veterans.
Red flag here was the republicans voting against it. Seemed strange when they all voted for it the previous time it was in the Senate. an additional 400 BILLION yes Billion added to it that can be spent basically on anything they want. See below video.
I’m not saying any of the bills are good or bad for the US, I’m simply indicating there risk on inflation and recession which are the main risks for trading at the moment. That’s a whole lot of new spending coming
Jobs and interest rate hike.
The Jobs report on Friday was more than twice what was expected, this along with the hawkish recent comments from the Fed that the hikes are far from over has changed the rake hike possibility of 75bp for September from 28% to 68%.
See below CNBC news report about jobs which I found interesting; this could be painting a much different picture to the jobs report than fist expected.
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