Okay, first inflection point, the market’s own 50-day moving average, and the market failed. We’re right on the mark for one very simple reason… it’s the oil price, stupid! Just watching oil, you can see with each twitch, up or down, other money follows it in, or out of, stocks, bonds, metals, and everything else.
I do have some new and very valuable intelligence, however. Previously, I learned from high up sources that America’s oil break-even price, for many firms in trouble, was up around $60 a barrel, and I’ve been writing that. But, just today, some new research came out showing that many of these very same firms have become more efficient and productive, and have been quite effective at reducing their cost per. As a result, it has been calculated, and is now believed that the real break-even for much of the industry as a whole, and particularly among those highly leveraged firms running great risk, and in the danger of failing, have gotten their break-even down to possibly as low as about $45 a barrel. Another way of looking at it, is that oil won’t have to double in price, but it still needs to rise by 50%… and that could still take quite a long time! Probably longer than a great many of these companies can last. The problem remains.
They’ll continue to produce for 2 reasons. One, if they stop, they’re all done. Period. Two, if they can continue revenue flowing just long enough, they hope to continue servicing their debt… until either demand catches up to production, or someone, somewhere else out there, cuts theirs enough to cause price to rise. In other words, they’re just trying to last long enough, if there is any deliverance to be had out there. They’re hoping to get lucky, is all! Problem is, no real increase in demand is showing up yet, and no cuts in production are being registered anywhere yet either. It’s a real crap shoot!
On the plus side, it would appear there was no panic, as volume looks to have come in about the same as yesterday’s gain. So, for now, and for awhile, it’s going to be all about oil. It’s down some more, our futures are off some more… and, we’ll get back before tomorrow’s open to see where things will be then. May you all be greatly blessed of the Lord!
Nothing new… Asia closed down. Europe’s down. And, our futures are off by a pretty good amount… why? Oil’s off by 3.6%! It’s a bear market, friends. It’s likely to be for awhile. 7:08 am EST. O, an oil storage report will be released this morning at 10:30. That ought to move the markets! And, how could I forget! The EPS avg for all 500 stocks in that index dropped another penny, and as declined by… 7.8% since the year started!!!
Here’s to your successful investing!
Harold F Crowell