November 24, 2017, 12:00 pm EST

As we head into the Thanksgiving day weekend, let’s talk about oil and Saudi Arabia.

On Thanksgiving night three years ago oil was trading around $73, when the Saudis blocked a vote on an OPEC production cut. Oil dropped 10% that night, and that set off a massive oil price bust that ultimately bottomed out early last year at $26.

The goal of the Saudis was to put the emerging, competitive U.S. shale industry out of business–to force oil prices lower so that these shale companies couldn’t product profitably. The plan: They go away, and Saudi Arabia retains its power on global oil. It nearly worked. Shale companies started dropping like flies, with more than 100 bankruptcies between 2015 and 2016.

But cheap oil had broader implications for the global economy, following the Great Recession. It exposed the global banks that had lent the shale industry hundreds of billions of dollars.

Additionally, collapsing oil prices directly weighed on inflation measures and the inflation expectations. That was bad news for the central banks that had committed trillions of dollars to avert a deflationary spiral and promote a normalization of inflation. High inflation is bad. Deflation is worse. Once a deflationary mindset takes hold, it feeds into more deflation. Central banks can raise rates to kill inflation. They have few tools to fight deflation (especially after the financial crisis).

So cheap oil became bad news for the fragile global economic recovery. With that, central banks stepped in early last year and responded with coordinated easing (which included direct asset purchases, which likely included outright oil and oil-related ETFs). Oil bottomed the day the Bank of Japan intervened in the currency market, and prices jumped 50% in a month as other major central banks followed with intervention.

Now, the other piece of this story: cheap oil damaged the shale industry and the global economy, but it also damaged the same folks that set the collapse into motion–Saudi Arabia and other oil producing countries. These countries, which are heavily reliant on oil revenues, have seen their budget deficits balloon. So, with all of the above in mind, in November of last year, the oil producing countries (led by Saudi Arabia) reversed course on their plan, by promising the first production cuts since 2008.

Oil prices have now recovered to the mid-$50s. And since OPEC announced production cuts last year at this time, U.S. petroleum supply has drawn down 5%. Meanwhile, global demand is running far hotter than forecasts of last year. Yet, OPEC is extending their production cuts into this market and may get even bolder next week at their November meeting. Why? Because now it suits them. Remember, Saudi Arabia’s next king has been cleaning house over the past two weeks, in the process of seizing hundreds of billions of dollars from his political foes. Higher oil prices help his efforts to reshape the Saudi economy.

As liquidity dries up into the end of year and holidays, we may see oil find its way back up toward those November 2014 levels (low $70s)–where the whole price-bust debacle started.

Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.

November 22, 2016, 7:30pm EST

Stocks continue to new highs today.  But with the holiday approaching, the big focus is oil.  It was two years ago on Thanksgiving day evening that the Saudis blocked a move by their fellow OPEC members to cut production, to put a floor under oil prices around $70.  Oil plunged in a thin market and never looked back.

Of course, we traded as low as $26 earlier this year.  That proved to be the bottom in that OPEC rigged oil price bust, which was intended to crush the competitive U.S. shale industry.

It worked.  The emerging shale industry was brought to its knees and we’ve seen plenty of bankruptcies as a result. But OPEC countries have been hurt badly too, taking a huge hit to their oil revenues.  That put some heavily oil dependent economies on default watch. So it finally became clear that cheap oil was a big net negative, not just for the U.S. economy, but for the global economy.  The risk of continued fallout in the oil industry was a direct threat to the financial system and, therefore, a risk to another global economic crisis.

With that, we head into next week’s official OPEC meeting with expectations set for a first production cut in eight years.  And we have the below chart, which would suggest that we could see oil back in the $70 area next year.

In 1986, the mere hint of an OPEC policy move sent oil up 50% in just 24 hours. They’ve more than hinted this time around, but the markets remain skeptical.  That skepticism should serve to exacerbate the speed and magnitude of a move higher if they follow through.

Follow me in our Billionaire’s Portfolio, where you look over my shoulder as I follow the world’s best investors into their best stocks.  Our portfolio is up 20% this year.  That’s almost 3 times the performance of the broader stock market. Join me here.

September 28, 2016, 4:30pm EST

Oil popped over $3 from the lows of the day (as much as 7%) on news OPEC has agreed to a production cut.

We’ve talked a lot throughout the year about the price of oil.  When it collapsed to the $20s, it put the entire energy industry on bankruptcy watch.

Of course, oil bounced sharply from those lows of February as central banks stepped in with a coordinated response to stabilize confidence. Not so coincidentally, oil bottomed the same day the Bank of Japan intervened in the currency markets.

The oil price bust all started back in November of 2014, the evening of Thanksgiving Day, when OPEC pulled the rug out from under the oil market by vowing not to make production cuts, in an attempt to crush the nascent shale industry.  At that time, oil was trading around $73.

You can see in this chart, it never saw that price again.

OPEC was successful in heavily damaging the U.S. shale industry through low oil prices, but it has damaged OPEC countries, too.

What will the news of an agreement on a production cut mean?

A policy shift from OPEC can be very powerful.  In 1986, the mere hint of an OPEC policy move sent oil up 50% in just 24 hours.  And as we discussed earlier in the year, the relationship between the price of oil and stocks this year has been tight.  At times, stocks have traded almost tick for tick with oil.

Take a look at this chart.

An oil price back in the $60s would be a catalyst for a big run in stocks into the year end. For a stock market that has been rudderless surrounding a confused Fed and an important election, this oil news could kick it into gear.

If you’re looking for great ideas that have been vetted and bought by the world’s most influential and richest investors, join us at Billionaire’s Portfolio.   We have just exited an FDA approval stock for a quadruple.  And we’ll be adding a two new high potential billionaire owned stocks to the portfolio very soon.  Don’t miss it.  Join us here.