Category Archives: oil

The End of the Era of the Dollar as the World’s Reserve Currency

Posted on by

Coins Link

The status of the USD as the world’s reserve currency has been a cornerstone of the global economy for decades. However, recent geopolitical and economic developments have raised concerns that the era of the dollar may be coming to an end. The US has increasingly used its dominant position to impose sanctions on other countries, weaponizing the dollar in the process. This has led many nations to seek alternative means of conducting international trade, such as barter or using other currencies like the euro, yuan, or even cryptocurrencies. The trend is a worrying sign for the US economy and the global financial system as a whole, as it could lead to a loss of confidence in the dollar and trigger a crisis of confidence.

Changing geopolitical landscape: rivals and former allies moving away from the dollar

The situation is compounded by the changing geopolitical landscape. Countries such as Russia and China, which have traditionally been viewed as rivals to the US, are increasingly asserting themselves on the global stage, challenging American hegemony. At the same time, other nations, including former allies and neutrals, are also moving away from the dollar, seeking to protect themselves from the risks associated with its use as a weapon. India, for example, has been buying Russian oil and conducting transactions in rupees, while Saudi Arabia and Iran have cooperated with China as a mediator, bypassing the dollar altogether.

Ron Paul’s views on the matter are relevant here. He has long advocated for the US to stop instigating conflicts and to focus on mutual interests and trade rather than conflict over forms of government. By following these policies, Paul believes the US could have avoided the current situation, where many countries are seeking to move away from the dollar as the world’s reserve currency. If the US had pursued a more cooperative approach to international relations, it could have maintained the dollar’s dominance as the world’s reserve currency.

Consequences of a shift away from the dollar

The consequences of a shift away from the dollar could be far-reaching. The US economy is heavily reliant on the dollar’s status as the world’s reserve currency, with around two-thirds of all foreign currency reserves held in dollars. A loss of confidence in the dollar could lead to a sharp decline in demand for US treasuries, making it more difficult and expensive for the government to borrow money. This could trigger a financial crisis, with ripple effects felt around the world. The US would also face a loss of influence on the global stage, as the dollar’s dominance has given it significant leverage in international affairs. The future of the dollar, therefore, is a matter of concern not just for the US but for the entire world.

Oil Ultra ETF UCO Goes Through Reverse Stock Split

Posted on by

This morning investors woke up to see their shares of UCO go from $1.35/share to $23/share. What happened was a reverse stock split, at a ratio of 25 shares into 1 share. By the end of the day on April 21, 2020 UCO then proceeded to go down to $14.57/share. That equates to about a 57% loss if you’re holding UCO stocks outright, and slim chance of profit if you have call options.

UCO is an ETF which is supposed to change twice as much as the price of oil. Oil, as you may know, has experienced a historic epic drop in prices as the plague has hit the world and people are confined to their homes. On top of this, Russia and OPEC have not cut production and have both left their “ceasefire” of production cuts – so production has actually risen!

Oil futures have actually gone into negative territory, time will tell how long this lasts. My guess is that negative prices will be unsustainable and eventually companies will just stop production and leave it all to the low cost producers (see table below).

Crude Oil Cost of Production by Country

The alternative is if some of these higher cost of production countries increase subsidies for domestic production or cut off imports. UCO is based on WTI prices, which stands for West Texas Intermediate. WTI futures are traded in New York, and traditionally the delivery hub for this oil has been Cushing, Oklahoma.

If protectionist actions are taken and US prices increase I expect UCO to follow suit. Given the high dependence of oil jobs in some of the countries listed I have very little doubt other countries will also take measures to protect their local industries and jobs.

Having lived through $100/bbl days and talk of Peak Oil being thrown around, I would have never had thought we’d come to a point like this. It will be a tale for the grandchildren to tell about the days when gas prices were below a dollar again.

If you’re interested in investing in oil futures take a look at our video on oil ultras. WARNING – these investments carry a lot of risk, moreso than company stocks. This is to show you what exists and not recommend any action, you should use your brain and think hard about the potential downside and how high the expense ratio is on these instruments.