Tags: Kass | QE | spike | oil

Doug Kass: QE3 Might Spark ‘Monumental Spike’ in Oil Prices

Tuesday, 18 Sep 2012 08:26 AM

By Dan Weil

Doug Kass, founder of hedge fund firm Seabreeze Partners, sees nothing good coming out of the Federal Reserve’s decision last week to launch a third round of quantitative easing (QE).

“The unintended consequence of QE Googolplex is that it lays the ground work (when coupled with the potential for an Israel/Iran confrontation) for a monumental spike in oil prices,” he tells Business Insider.

Crude oil has gained about 10 percent since early August, with the October NYMEX contract closing Monday at $96.62.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist. 

“This has the potential of contributing to a synchronized global economic downturn in 2013 (already global manufacturing is slowing), as the world's consumers are already bending under the pressure of rising prices for the necessities of life (e.g., food),” Kass says.

And the problem is more than economic.

“If I am correct, we will see more civil unrest — more riots in the months and year ahead,” he notes. “This will be politically and economically destabilizing.”

U.S. corporate earnings will likely slump too, Kass says. He sees profits dropping up to 5 percent next year and believes that spells trouble for the stock market.

On Monday, oil suffered a sudden plunge — more than $3 in a minute — of unknown origins.

“[That] price action appeared to highlight an unusually nervous market environment in which oil has become heavily reliant upon intangible forces such as economic stimulus …,” Jim Ritterbusch of consulting firm Ritterbusch & Associates writes in a report obtained by Bloomberg.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist. 

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