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For the Record (Read 173293 times)
perceptions_now
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Re: For the Record
Reply #1500 - Apr 24th, 2017 at 12:12pm
 
Why Your Pension Is At Risk


Summary
State and local government pensions are extremely underfunded.

Demographics are making matters worse.

The assumed rate of returns is unrealistic.

Time is not on your side. Action must be taken.


Combined across all states, the price tag for unfunded pension liabilities is $17,427 for every man, woman and child in the United States.
By most measures Illinois ranks worst, with unfunded liabilities of nearly $193 billion in 2015 according to Moody's. Illinois has 66 billion in its pension coffers to cover pension obligations of $233 billion.
In fact, state pensions in Illinois are 71% underfunded.

In determining how much is to be funded there must be an assumption made regarding the rate of return of the plans assets. Today the average assumption made by actuaries for pension plans is between a 7% and 7.5% rate of return.

The actuaries must also consider the age demographics of the plan. Simply put, you must anticipate the number of participants moving into retirement at any given point in time. If you have an aging group of employees you will be paying out more as this group leaves the workforce.

There are two methods in which a shortfall of a pension liability can be recouped. First of all they must be funded adequately. Unfortunately, some of these plans have not been funded for many years.

Secondly, a portion can be gained through higher than assumed rate of returns. For example, instead of earning 7.5% (assumed rate) you earn 10%. In this case your unfunded liability would be reduced by the difference.

I know, I've been talking about state and local governments unfunded pension liabilities for some time. In all fairness, I should describe the most unfunded government pension plan of all, our very own Social Security Fund. It is by far the most neglected pension plan in our history.

Here are the facts, the baby boomers are approaching the time in their lives where they soon will receive full benefits from Social Security. This group constitutes 25% of our population. At the same time our working population is shrinking (ages 25 to 54). Currently, all Social Security payroll deductions are for the most part being spent to fund current Social Security recipients. As you can see, the demographic portion of the equation is not good.
To make matters worse, Congress has been borrowing against this pool of Social Security assets since the mid-1960s.


The pooled assets in the Social Security fund are invested in U.S. Treasuries, earning around 2.22%. As you can see this is a far cry from the actuaries assumed rate of return of 7% to 7.5% in the State and Local pensions across the country.

There soon will be a "come to Jesus" moment regarding our Social Security Trust Fund as well as our state and local pensions. Low rate of returns and an aging population are simply compounding the problem of unfunded pension liabilities throughout our country. It could be argued that the 7% to 7.5% assumption on the rate of returns of all pensions is overly generous.
In today's environment a 3% return on fixed income is fairly close to what you can expect.

For just a second let's drill down into the two components mentioned above, demographics and rate of returns. Demographics is simple and something we really can't control. It's very definable and certainly irreversible.


On April 2 there was an article from BlackRock Retirement Institute titled "Demographics are Destiny." This is a very well written article and I encourage you to read it. Aging populations are contributing to two of the defining characteristics of the current economic environment: slow growth and low interest rates.
Economic growth is driven by increases in the labor force and productivity. As I indicated above, the labor force is shrinking and will continue to do so for some time to come.


Whether you like it or not, we depend on legal immigration to fill the void of laborers in this country. Immigration is a huge component to economic growth in this country. Productivity on the other hand has been very low due to a number of factors, but certainly harder to explain than the shrinking labor force.

The aging population has significant economic ramifications. Older Americans are a drag on consumption and debt expansion. Therefore, we have a significant reduction in consumption as America ages.


This $5 trillion deficit in just state and local pensions let alone the Social Security Trust Fund must be addressed. Hopes of growing out of this issue is unlikely.

The next time you see a politician ask them about how they plan to fix it. They will simply dodge the question and walk away.

The only answer will be to raise revenues. Yes, that means higher taxes and increases in the retirement age.

If we don't speak up, our elected officials will continue to keep their head in the sand and will continue to kick the can down the road for someone else to fix.

Remember: The longer we wait the worse it will get.

https://seekingalpha.com/article/4064254-pension-risk?ifp=0
=================================
There are, in fact, three major issues influencing events -
1) Demographics
2) Energy
3) Climate Change

Good luck with the Pollies to listen, let alone do anything!!!





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« Last Edit: Apr 24th, 2017 at 12:27pm by perceptions_now »  
 
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Re: For the Record
Reply #1501 - May 1st, 2017 at 1:21pm
 
10 Ugly Messages From The Bond Market


Summary
The global bond markets have been screaming an ugly message at us loud and clear, and I'm afraid it's not a positive one.

The implications for your investment portfolio are so momentous and far-reaching that I am going to have to list them one by one.

Read them and weep:

1) The US is going into recession. The recent spate of "hard" economic data says this is exactly the case, with Q1 GDP forecasts pared back to only 0.5%, Consumer Price Index -0.3%, Core CPI -0.1%, and Retail Sales -0.2%.

2) No major legislation will be enacted into law this year, not for healthcare and not for tax reform, deregulation, or infrastructure.

3) The president is a phony. Lots of talk but no action is something the markets were only willing to tolerate for two months after the inauguration.

4) The US is about to enter prolonged ground wars in North Korea, Syria, and Afghanistan. It turns out that bombing foreigners is easier for the president than getting legislation through a Republican-controlled congress. It always is.

5) The stock market is about to crash. So far, we have been suffering a death by a thousand cuts. That "Sell in May" thing is just around the corner.

6) The Trump trade is toast. Financial, commodity, energy, coal, and industrial stocks will lead the charge to the downside. Iron ore prices down by a third in two months tells the whole story.

7) The price of oil is about to collapse once the markets call the bluff on a second OPEC quota extension. Even if they agree, quota cheating is about to explode, dumping millions of barrels of oil on the market before it becomes worthless.

8) Gold (GLD) will rocket. It has already blasted through its 200-day moving average to the upside, and $1,300 per troy ounce beckons. Gold could imminently hit a four-year high at $1,380, and then eventually the old high of $1,922.

9) The US dollar is headed lower.

10) The unemployment rate, now near all-time lows, is about to take off. The great irony here is that while the president vociferously campaigned on an aggressive jobs program, he may well preside over the biggest job losses in history, thanks to hyper-accelerating automation and artificial intelligence.

https://seekingalpha.com/article/4065834-10-ugly-messages-bond-market?ifp=0
====================================


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Re: For the Record
Reply #1502 - May 1st, 2017 at 1:35pm
 
China's Coming Demographic Nightmare


Summary
Thanks to China's “one child only” policy and a cultural preference for children who grow up to become family safety nets, there are now 32 million more boys than girls.

The end result has been a barbell-shaped demographic curve, unlike that seen in any other country.

The end game for this policy has to be the Japan disease: a huge population of senior citizens with insufficient numbers of young workers to support them.

Economists now wonder if the practice will also understate China's long-term growth rate.

The end game for this policy has to be the Japan disease: a huge population of senior citizens with insufficient numbers of young workers to support them. The markets won't ignore this.

https://seekingalpha.com/article/4066095-chinas-coming-demographic-nightmare?ifp...
====================================
But, the Chinese are still "building like there is no tomorrow", with not just an excess of housing, BUT ENTIRE CITIES HAVE BEEN BUILT & REMAIN UNOCCUPIED!
This MUST & WILL HAVE RAMIFICATIONS - WHICH ARE NOW ON THEIR WAY!
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Re: For the Record
Reply #1503 - May 7th, 2017 at 11:43am
 
Aging Populations Likely To Weigh On Lofty Asset Valuations


It’s official, as of the 2016 census released today, Canada now has more citizens over the age of 65 than under the age of 15. See: Canadian seniors now outnumber children for the first time. Here is the chart, showing the cross-over last year and the projected spread set to widen over the next 45 years.
...

At current birth, death and immigration numbers, a full 23% of the Canadian population is projected to be seniors in just 14 years, on par with Japan today – the world’s ‘oldest’ population
where retirees are no longer net savers, but already net-sellers of financial assets and real estate in order to raise cash for living expenses. Near zero investment yields are accelerating the need for retirees to consume savings in Japan and most of the world.


As in most wealthy countries, the average number of live births for Canadian women at 1.59 is less than the 2.1 needed to maintain, let alone grow the population.
Only more immigration can soften the rate of decline in our working age to total population ratio, and immigration has become increasingly unpopular with the masses.

...

The defining question for the real estate frenzy that’s driven an estimated 84% (Scotiabank) of Canada’s economic growth over the last 6 years then is who will buy our present concentration of single-detached homes (53.6%, see below) full of old-tech energy and efficiency systems, presently trading far,
...

far, above reasonable affordability and income multiples, amid escalating taxes of every kind?

What about foreigners looking to park money in Canadian assets, can’t they ‘buy it all’ and save the day? Doubtful for many reasons, but lest we forget: the ones with the buying power are also predominantly of the same aging demographic. They can’t be voracious forever. In all these circumstances, it’s hard not to see today’s lofty asset prices must have a target on their bubble.

https://seekingalpha.com/article/4068901-aging-populations-likely-weigh-lofty-as...
====================================
Japan is the "Demographic Forerunner", which is being followed by many other countries, including OZ!

The greatest difference between Japan & what is to come, is that Japan started the trend and most other countries had not yet gone there, so they were able to assist Japan in some way, shape or form.
THAT WILL NOT BE POSSIBLE, AS MOST OTHER COUNTRIES FALL TO SIMILAR DEMOGRAPHIC ISSUES, PLUS ENERGY ISSUES, PLUS CLIMATE ISSUES, PLUS RISING DEBT & OTHER RELATED ISSUES!
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Re: For the Record
Reply #1504 - May 9th, 2017 at 10:39pm
 
The_Barnacle wrote on May 31st, 2016 at 9:31pm:
perceptions_now wrote on May 15th, 2016 at 3:06pm:
I expect 2016 & 2017 to be crunch years!



I will now make a prediction of my own. on the 1/1/2018 when I remind you that your prediction was wrong, you will explain that events have delayed the collapse and you now confidently predict it will happen in 2018 & 2019.

Lets see if my prediction comes true........


It's been almost a year since your prediction. Time is running out
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Re: For the Record
Reply #1505 - May 18th, 2017 at 7:39pm
 
...
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Re: For the Record
Reply #1506 - May 26th, 2017 at 5:23pm
 
On October 1st, 2007 the OZ All Ords hit 6,779.

Today, nearly 10 years later,  the OZ All Ords closed at 5,792.

Anyone who thinks WE have got past the GFC, IS WRONG.

BUT, THERE IS A MASSIVE AMOUNT OF "DELIBERATE OVERSIGHT & MISDIRECTION" GOING ON, FROM THOSE IN POWER OR HOPING TO GET INTO POWER AND THOSE AT THE TOP END OF TOWN!
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Re: For the Record
Reply #1507 - Jul 16th, 2017 at 11:55am
 
A Crisis Of Historic Proportions Is Once Again Bearing Down On Us


Financial politicians (aka central bankers) have a long history of saying the wrong things at the wrong time.

Far worse, they simply fail to tell the truth. They lie because they’re afraid of the impact the truth will have.

Central Bankers Have Hit a Brick Walk That They Have Built Themselves

The present challenge arose because our central bank monetary heroes allowed QE, ZIRP, and in some places NIRP to go on far longer than was wise

These measures may have been necessary in 2008 and for a short period afterward. But these policies should not have stayed in place, much less been expanded, for 7–9 more years.

At least, our central bankers are talking about the problem. Their new buzzword is policy normalization. Everyone (except the Bank of Japan) agrees that abnormality has outlived its usefulness.

However, solutions are difficult when that first timid step runs you smack into a brick wall that you yourself built because you waited too long to act.

The Fed, the ECB, and the Bank of England have waited four years too long. Now they are finally tightening in a strange combination of caution and boldness. Each passing month makes them less cautious and more aggressive.

Like kittens, they venture out from their mother gingerly at first but soon are romping underfoot and destroying furniture.

That may be an amusing analogy, but reality is not amusing at all. The four largest central banks together have about $13 trillion on their balance sheets (see the chart below), a large portion of which they believe needs to roll off.

...
Removing it without breaking something important will not be easy.

Implications Are Dire and Global.

In today’s highly leveraged markets, the pain caused by those defaults will quickly spread to lenders in Europe, Japan, and the US.

You might respond that more stringent capital requirements mean today’s banks are better able to withstand such scenarios. That’s partly true. Yes, they pass the Fed’s stress tests, but the Fed can’t test every possible adverse scenario. Generals always fight the last war. The next crisis probably won’t originate in residential mortgage loans. It will come from somewhere else, and we have no idea whether the banks are actually ready for it.

You and I can’t control whether banks are ready, but we can control whether we are ready. I’m convinced myself beyond any doubt that a crisis of historic proportions is once again bearing down on us. We may have little time to prepare.

We definitely have no time to waste.

https://seekingalpha.com/article/4087278-crisis-historic-proportions-bearing-us?...
==================================
Debt has been used, in the past, as part of the "usual Economic Cycle" and then the Local/Global has rebounded.

But, these are not usual times, this is NOT the usual Debt AND there are other massive factors, which are also NOT USUAL, such as -
1) Demographics
2) Energy
3) Climate Change
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Re: For the Record
Reply #1508 - Jul 16th, 2017 at 6:10pm
 
We are ALL INTEGRATED!
In fact, pretty much EVERYTHING IS INTEGRATED!

Many assumptions have been made over time, Economic & Otherwise, by those in many areas of our Global Society.
As we are now proceeding, MANY OF THOSE ASSUMPTIONS WILL NOT BEAR OUT TO BE CORRECT!
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Re: For the Record
Reply #1509 - Jul 19th, 2017 at 9:20pm
 
Quote:
I’m convinced myself beyond any doubt that a crisis of historic proportions is once again bearing down on us. We may have little time to prepare.

We definitely have no time to waste.


Says seeking alpha which has successfully predicted 200 of the last 2 recessions


Quote:
To me it feels like we are in the calm before the storm. More specifically, it eerily feels like the months before the financial crisis and meltdown of 2008. The similarities are striking to me and think the market is ignoring the signs of an impending and significant pullback over the summer.

Here are ten reasons 2011 is starting to feel so much like 2008.

https://seekingalpha.com/article/266912-10-reasons-2011-is-feeling-more-and-more...


2011????
Did I miss the economic apocalypse?
Grin Grin Grin Grin
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« Last Edit: Jul 19th, 2017 at 9:28pm by The_Barnacle »  

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Re: For the Record
Reply #1510 - Aug 15th, 2017 at 12:46pm
 
Dow 30,000, Not If Demographics Have Anything To Say


Summary
Demographics drive long-term returns.
U.S. demographics are deteriorating.
Millennials won't save the day.

Longer term cycles are largely influenced by demographics.

Although there are advancements in medical technology allowing women to have children later in life, women generally have a smaller number of children if they start later in life. This is shown as the fertility rate and births as a percentage of the population have declined to new lows.
...

The ultimate outcome is a slower growth in population, which is also declining. There are other factors that play into birth rates and population growth, such as immigration, but the aforementioned demographics are a major reason.
...

Lower population growth by itself won't lead to lower economic output if productivity makes up for it. However, productivity has remained firmly below 2%, which is one of the weakest periods on record.

Combining all this information leads me to a couple of conclusions. One is that economic growth is not going to take off given where we are in the economic cycle and considering how many Boomers will be retiring in the next few years. Two, this does not mean a renewed era of inflation. While there are lots of debate about if the Fed can reduce its balance sheet and the implications for the bond market, inflation will not be the reason rates rise in the foreseeable future. I wrote in a previous article why I purchased treasuries (TLT) which I continue to hold today (up approximately 5.8%). Lastly, more money than ever is being piled into passive investments that promise over the long haul you will earn a decent return. Demographic forces will curtail growth and subsequently hurt equity returns (absent more central bank intervention). Right now, with the markets near all time highs, and valuations stretched, it's best to move allocations more to bonds or cash.

https://seekingalpha.com/article/4098192-dow-30000-demographics-anything-say?ifp...
-----------------------------------------------------------------
Demographics has been & is, one of the Major Economic drivers & IT IS SLOWING, both in the US & elsewhere AND the Total Population will also go into Decline, as is already showing up in some countries!
In addition, there are a few other Major Economic Drivers, which must come into the picture -
1) Energy - Supply & Prices
2) Climate Change
3) Debt
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Re: For the Record
Reply #1511 - Aug 15th, 2017 at 1:26pm
 
Another significant factor in population increase is the level of wealth. Unlike the animal kingdom, having more access to consumption seems to lower the birth rate. All the western economies have experienced this followed by the Asians.

Have you allowed in your analysis for the effect of innovation & technological change? Shifts up in economic activity & wealth (not necessarily equally distributed) in the long term have been associated with innovation leaps.
Look at agricultural shifts like the three-field system. Look at the 18th & 19th century with water & then steam power.
And the process becomes virulent in the 20th century.
That won't stop. . .barring a catastrophe.
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Know the enemies of a civil society by their public behaviour, by their fraudulent claim to be liberal-progressive, by their propensity to lie and, above all, by their attachment to authoritarianism.
 
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Re: For the Record
Reply #1512 - Aug 16th, 2017 at 12:39pm
 
The Legacy of ‘The Limits to Growth’


Article from Dick Smiths FAIR GO.

https://www.dicksmithfairgo.com.au/legacy-limits-growth/#comment-1080
====================================
DEMOGRAPHICS HAS BEEN & IS, ONE OF THE MAJOR LOCAL/GLOBAL ECONOMIC DRIVERS, for quite some time & certainly has been for much of the Modern Economic Era!
But, with THE TOTAL POPULATION LEVELS ALREADY SLOWING IN MANY COUNTRIES, DEMOGRAPHICS IS NOW A LEADING FACTOR IN OUR RECENT ECONOMIC SLOWDOWN!
In fact, THE GLOBAL POPULATION MAY WELL GET TO 8 BILLION, BUT IT SEEMS LIKELY TO THEN STRUGGLE BEYOND THAT & A GLOBAL DECLINE MAY WELL THEN BE LIKELY TO START, WHICH WILL FURTHER DRIVE OUR ECONOMIC STRUGGLES DOWNWARD!.
IN ADDITION, THERE ARE A FEW OTHER MAJOR ECONOMIC DRIVERS, which must come into the picture –
1) ENERGY – Supply & Pricing.
2) CLIMATE CHANGE – Likely to further Adversely affect our capacity for an increasing Population.
3) DEBT – Already TOO HIGH & BEING DRIVEN HIGHER.
In short, UNLIKE WHAT POLITICIANS & OTHERS MAY SAY, EVERYTHING HAS LIMITS & WE ARE NOW BEARING DOWN ON SOME OF THOSE LIMITS!
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Re: For the Record
Reply #1513 - Aug 16th, 2017 at 12:44pm
 
bogarde73 wrote on Aug 15th, 2017 at 1:26pm:
Another significant factor in population increase is the level of wealth. Unlike the animal kingdom, having more access to consumption seems to lower the birth rate. All the western economies have experienced this followed by the Asians.

Have you allowed in your analysis for the effect of innovation & technological change? Shifts up in economic activity & wealth (not necessarily equally distributed) in the long term have been associated with innovation leaps.
Look at agricultural shifts like the three-field system. Look at the 18th & 19th century with water & then steam power.
And the process becomes virulent in the 20th century.
That won't stop. . .barring a catastrophe.


YES! That could have a bearing, BUT I would & have already (on numerous occasions), strongly recommend against relying on Technology to ride over the hill, at the last moment & there is certainly nothing on the horizon at the moment which would suggest a possible saviour. 
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Re: For the Record
Reply #1514 - Aug 20th, 2017 at 7:43pm
 
Saudi Arabian Oil Is Running Out And That Will Affect Long-Term Oil Markets


Summary
Saudi Arabia is one of the most significant players in the oil markets. The country produces more than 10% of worldwide oil. But things aren't as pretty as they seem.

A significant portion of Saudi Arabia's oil comes from its Ghawar Field which appears to be running out. The country might only have 1/3 of the oil that it says.

Despite this, the country is continually thrust into the world spotlight thanks to one reason primarily. The country directly controls more than 10% of the world's oil production, and through its prime position in OPEC, has a significant say in worldwide oil prices.

As a result, anything that affects the oil environment in Saudi Arabia has a profound effect on the worldwide oil markets. And Saudi Arabian oil, as we will see throughout this article, is running out. This will have a significant impact on the oil markets and greatly increase their prices. And this is an impact that will have a profound and upcoming effect on the oil markets.

Saudi Arabian Oil Reserves
...

Saudi Arabia has 266.8 billion barrels of oil reserves located under those sandy plains. Saudi Arabia currently produces approximately 0.01 billion barrels of this oil per day, meaning that at the country's present rate of production, its oil should last it roughly just over 73 years. While that is significant production, it is important to keep in mind that the country has already been producing oil for that long.

And that means that Saudi Arabia's oil should run out by roughly 2090, barring no other events.

But there remains skepticism about the true size of Saudi Arabia's oil reserves. The country increased oil reserves by 100 billion barrels from 170 billion barrels in 1987 to almost 270 billion barrels by 1989. Since then, the country's reserves have remained unchanged despite the fact that Saudi Arabia has produced almost 100 billion barrels of reserves since then.

Looking at a worst case scenario, and removing both the country's increase in reserves from 1987-1989 along with the country's production since then, and the country might only have 70 billion barrels of oil left.

That remaining oil, in the present environment, would last the country just 19 years. And that doesn't keep into account that the oil is likely much less economical to recover in the present oil environment as compared to where it was two years ago. And yet we have seen no amendments in the country's economical oil reserves.

And yet, Saudi Arabia, seems to be afraid that its oil is running out. The country has recently announced its ambitious Vision 2030 plan to diversify its economy from oil. The country plans to spend many billions of not into the trillions to diversify the country's economy.

Saudi Arabia Production
Looking past Saudi Arabia's oil reserves and we get a more telling picture of the company's production.
...

Saudi Arabia's production was increasing from the early-1990s to the late-2000s before balancing out. Since then, the country's production has remained rather constant, and it is expected to remain so for the coming decades. This is anticipated to remain so despite increasing oil demand which the country has not been taking advantage of. That shows that the country plans to be holding on to its existing production without taking advantage of growing markets.

Saudi Arabia's Ghawar Field is the single largest oil producing field in the world producing approximately 5% of the entire world's oil production. The size of this field and its incredible reserves means that it is essential to the entirety of Saudi Arabia's production and strategy going forward. And that means any problems in the fields reserves bode poorly for the country.

The Ghawar Field began water flooding in 1965 and by 2003, the water cut for the field had reached 32%. Before that, the water cut was approximately 27%. Since then, the field's water cut has increased significantly with the North Uthmaniyah water cut reaching 46% by 2006. Other details on the fields water cut are hidden, largely by the Saudi Arabian government, however, it is very plausible that the water cut has increased since then.

Conclusion
Saudi Arabia might seem like it has a ton of oil as one of the strongest oil countries in the world. Despite that, the country has significant difficulties coming forward, as it appears its oil is running out, even if it hides it from investors.
While the country says it has 270 billion barrels of oil, looking at the numbers further makes it appear as if it might have just 70 billion barrels of oil.


https://seekingalpha.com/article/4098775-saudi-arabian-oil-running-will-affect-l...
==================================
Sometimes things just aren't what they seem, Energy is one of those things!!!
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