Lions and tigers and bears.
Oh my!
What should we do, man behind the curtain?

Maybe I should follow the advice of such financial stalwarts as G. Gordon Liddy and William Devane.
I think I'll sell everything, call up Lear Capital, and put everything into bags of silver and gold coins.

That worked out pretty well for people last time.

A bit of upside this morning for the U.S. economy

Non-farm payrolls up 292,000 in December vs. an estimate of 252,000. 

Last edited by TheLagerLad (1/08/2016 8:35 am)

Here's another thing I need enlightened about: with crude oil and gas pricing going down around the world, which should put more disposable income in the hands of consumers to spend on other things like clothes, or appliances, or cars, or food, or whatever, and the lower cost for power plants that utilize these products to generate power that should translate into lower utility costs for businesses, why are analysts touting this drop in price as one of the major causes for recent drops?

Seems to me, the lower cost of oil and offshoot refining products should be good for economic growth. What am I not seeing?

Here is one explanation I read:

4 reasons collapsing oil prices are rattling stocks


NEW YORK (MarketWatch) — Falling oil prices are supposed to be good news on balance for the U.S. economy. Nevertheless, crude’s astonishingly rapid decline has served to rattle investors, triggering a strong pullback in stocks this week.

On the New York Mercantile exchange crude oil for January delivery settled at a remarkable $57.81, shedding $5.25, since Monday. Here are some of the reasons investors are unsettled by oil’s drop US:CLF5   to five-and -half year lows:

NEW YORK (MarketWatch) — Falling oil prices are supposed to be good news on balance for the U.S. economy. Nevertheless, crude’s astonishingly rapid decline has served to rattle investors, triggering a strong pullback in stocks this week.

On the New York Mercantile exchange crude oil for January delivery settled at a remarkable $57.81, shedding $5.25, since Monday. Here are some of the reasons investors are unsettled by oil’s drop US:CLF5   to five-and -half year lows:


Global growth

The benefits of cheap oil aren’t hard to pick out: Cheaper gasoline, and lower prices for other fuels, is often likened to a tax cut for consumers.

The rub, though, is that the decline in oil prices alongside other economically sensitive commodities, including copper, might signal trouble in the global economy. A sputtering recovery in Europe and concerns about Asia have undercut oil demand even as robust production adds to a global oil glut.

The oil plunge “is betraying that we potentially have something darker and more sinister on our hands than we may have thought just a few weeks ago. If things play out as I suspect, interest rates and oil prices will head meaningfully lower in the near term,” wrote Scott Minerd, global chief investment officer at Guggenheim Partners, this week.

Minerd said he still expects a seasonal rally to carry stocks through the current oil-related turmoil, but investors should beware.

High-yield corporate bonds have come under heavy pressure as oil prices have declined, reflecting worries about highly-leveraged shale producers and other energy names.

And while stocks have stepped back this week, some strategists still see a troubling disconnect between the still-relative calm in equities overall and the carnage in high-yield and energy-sector stocks.

“Either the market is too negative on energy, or it is not diligent enough in thinking about broader implications,” wrote Deutsche Bank credit strategist Oleg Melentyev in a note earlier this week.

Not everyone’s alarmed, however. For virtually the first time in four years, junk-bond yields are above the earnings yield on the S&P 500 SPX, -2.50%  noted Thomas Lee of Fundstrat Global Advisors, in a note, but observed that high-yield yields remain low by historical standards.

That, however, is largely a reflection of the fact that high-yield was relatively expensive versus stocks and that high yield has more exposure to the energy sector than the S&P 500, Lee said, arguing that stocks are poised to decouple “somewhat” from the high-yield market over the next few months.


Russia redux

There’s a lot of talk about differentiation in emerging markets with analysts urging investors to parse the differences between emerging economies that are adversely affected by falling oil prices and those that benefit.

Turmoil in Russia, which has seen the ruble USDRUB, -0.37% plunge to an all-time low versus the dollar as the nation’s central bank scrambles to respond to a currency crisis, has triggered reminders of the country’s 1998 default, which sent shock waves through emerging markets that eventually hit developed markets as well. The crisis was a factor in the collapse of the Long-Term Capital Management hedge fund.

While the world has changed in many ways since 1998, some analysts still see significant danger.

“We would argue that risks are magnified given the substantial growth in EM holdings in the years since 1998. Near-zero interest rates in the U.S., Japan, and other developed economies have forced many investors into more-speculative and higher-yielding investments,” said David Rodriguez, senior analyst at DailyFX. “Yet fear is a much stronger emotion than greed; the first sign of danger could force a market deleveraging akin to what we saw post-Lehman in 2008 and the Russian crisis of 1998.”


Bank exposure

The Russian crisis of 1998 isn’t the only ghost revived by the oil turmoil. It also stirs shades of the 1980s oil bust that led to a wave of bank failures across Texas.

Analysts at Bank of Montreal recently took a look at the U.S. banks most exposed to energy (see chart above).

They didn’t sound the alarm in a recent note, observing that Texas and Oklahoma both have more diversified economies than was the case in the 1980s. They also noted that banks generally stress test energy loans down to the mid-$50s per barrel. That said, “if oil prices should fall below $65 for an extended period, it could lead to weaker energy loan demand and also have a negative impact” on economists in still “energy-dominant” states such as Texas and Oklahoma.

Banks with energy exposure may have to add to reserves, potentially creating a headwind for earnings, they wrote.

And don’t forget about banks in other energy-producing countries. For example, analysts have also raised concerns about Canada’s well-regarded banking sector, pointing to macro risks tied to a hit on employment as well as the impact on energy lending.



Now, I read that a couple of times and it sounds like a bunch of financial mumbo jumbo by a bunch of financial analysts that don't have any answer. Plus they contradict themselves. Either they're brilliant and I'm very stupid, or . . . "it was clear as mud, but it covered de groun'"

Here's another thing I need enlightened about: with crude oil and gas pricing going down around the world, which should put more disposable income in the hands of consumers to spend on other things like clothes, or appliances, or cars, or food, or whatever, and the lower cost for power plants that utilize these products to generate power that should translate into lower utility costs for businesses, why are analysts touting this drop in price as one of the major causes for recent drops?

They answered this question briefly on Marketplace A.M. on NPR this morning.

So you're right, low gas prices are great for consumers. Less at the pump means more $$$ in the pocket to spend on food, clothes, restaurants, etc.

But from a stock market perspective, a good portion of the world's biggest companies are, you guessed it, energy producers.

So low oil prices equal hard times for the oil companies, which translates into falling stock prices, which translates into a general sell off in stocks.

What I've heard for the average "consumer investor" is that now is a good time to shift your investments into retail stocks like Macy's, Wal-Mart, and restaurant stocks. Basically, wherever people can go to spend the little bit of disposable cash they have while gas prices are low.

flowergirl wrote:

I would argue that lower gasoline prices are not so great for all consumers because:  Airlines have continued to increase fares in spite of their lower fuel costs; I have yet to see any reduction in food costs in spilte of lower production costs and especially much lower transportation costs.  Some consumers like many elderly who drive less are not receiving the same degree of benefits as many others.

Looks like heating oil is down to about $1/gal from a high of about $3/gal in just 2014. Same with natural gas which is about half of its 2014 high. Hopefully that has been a big help to some seniors.