Jim:
We got hit with a
trifecta of bad news
today that crushed,
bent, spindled and
mutilated the Dow,
down 219 points, and
left people
wondering what the
heck happened to the
Benjamin "Booyah"
Bernanke rally, now
that almost the
entire move from
Tuesday - all but 50
points - has been
erased.
What happened to
this market that was
looking so good to
make it look so
ugly?...
The first blow was
merely six words
from the outgoing
president about the
hoped-for... at
least for this
market... auto
bailout... six words
that shook this
market to its
core!... "I haven't
made up my mind"...
Yeah, that's what he
said. Those words
terrorized this
market!... And sent
the Dow Jones - not
to mention General
Motors - reeling!
Once again, the
market's starting to
price in the
possible bankruptcy
of the auto
companies, and
there's absolutely
no way we can stay
up here, if
President Bush makes
up his mind, and
decides that with
one last stand, he's
going to be Herbert
Hoover and deny the
autos a bailout,
because of the
union's
intransigence over
taking pay cuts
right now... And,
yes, I am blaming
the unions. Point
blank, okay...
Second, you never
like it when your
parent company... is
the catalyst for
anything on the
downside... But you
can see a headline,
"Dow falls 219
points as GE's
rating is in
question." And,
after today's
decline, on the
heels of that S&P
review... I'm not
going to fight the
characterization
that the parent
company of our
network had a lot to
do with it. Let's be
clear... General Electric (GE), parent
company of this
network, isn't going
to lose its coveted
triple-A rating, but
it is under
scrutiny... and,
when the biggest
company in America
might get
downgraded... get
its credit
downgraded... you
can't feel
confident. You feel
worried to say the
least. I know I do.
Finally, the thing
that scared
investors the most
is going to seem
totally
counter-intuitive to
you, because it's a
positive for you...
and that's the
collapse of oil...
down to $36 a
barrel... That's a
colossal $3.84 off
of where it was
yesterday. I mean,
that's
extraordinary. I was
shocked at this.
That means cheap
gasoline... I think
that gasoline should
be down a dime on
this, maybe even
more... and cheaper
electricity...
See all
of
tonight's
stocks
mentioned
on
Yahoo!
Finance,
here...
Thursday,
December 18, 2008
(Cont'd from
above)...
Jim (cont'd):
Now, shouldn't mean
that the consumer
can come back from
the dead on this,
and we can rally...
I mean, shouldn't
it?... Doesn't
cheaper oil make us
all happy, and we're
willing to spend...
I mean, haven't we
always been taught
that that's a boon
to the economy? How
bad can that be?...
Well, pretty
simple... Oil is the
ultimate thermometer
for the U.S. economy
and the world's
economy.
Now, expensive oil,
or at least stable
oil, means that
there's some demand
around the world.
Rallying oil
signifies perhaps
that we're going to
get some roaring
industrial
production, which is
what we need... It
would mean that
there's a lot of
manufacturing...
there's a lot of
shipping...
Now, cheap but
rapidly declining
oil... I mean, oil
is what we would
describe as "free
fall"... That means
there's no demand...
that means that
nobody wants to
produce anything...
that means no one
wants to transport
anything... that
means China has gone
completely off the
grid...
Oil, down 59% for
the year, 75% since
its peak... and
almost $4 in a
day?... You know
what this reminds me
of? It reminds me of
a patient who, at
$147 per share, had
a scorching fever,
right... But then,
at $36, and
seemingly still in
freefall, it feels
like rigor mortis is
setting in...
That's how cheap oil
can be a sign for
the economy...
And, if it's bad for
the economy, it's
even worse for the
stock market.
Remember, oil stocks
have all been added
to the S&P, one
after another after
another... and the
Dow... oil stocks
are a huge part of
the averages now.
Exxon Mobil (XOM)
is the
second-largest Dow
component.
Chevron Corp. (CVX*)
is
the third. Together,
they're making up
almost 14% of the
Dow...
So let's take a look
at it... Of today's
219-point decline,
Chevron and Exxon
alone accounted for
62 points of it.
That's more than a
quarter of the
downside from two
stocks. These guys
can pull the index
down all by
themselves.
But the combination
of falling oil, the
possibility that the
automakers will not
be saved, and the
risk, albeit small,
that GE might lose
its triple-A
status... those are
deadly. And it gave
you the nasty
selloff we saw
today.
The bottom line is
simple...
▼ ▼
▼ ▼
▼
The Bottom Line!:
These three
negatives... autos,
General Electric (GE) and oil... left a
real sting, and sent
us reeling... just
when it looked like
a Santa Claus rally
was about to begin.
Sorry kids, it looks
like Santa's taking
his good ole time
coming to town, with
a possibly frolic
with the bears at Jellystone National
Park, before he
drags his butt to
Wall Street!
