With the recent collapse in the price of oil, I'm in the camp that thinks this turmoil could have unforeseen consequences. Sure.. . I know why retail stocks are higher. Pay less for gas at the pump, the more money for the consumer to buy all the crap that's peddled to them on a daily basis. It makes sense. The consumer has hundreds of extra dollars in their pockets to buy all the crap the American Dream dictates they must buy. That's fine and dandy. And you know what? It makes sense right here. It does. Assuming the price of oil was properly hedged by oil dependent companies... lower oil prices are the best stimulus check our generation has ever seen.
Record High Stock prices ------ CHECK
Health Care for Everyone ------ CHECK
Lower Gas Prices so we can spend our money getting fat at Olive Garden ------ CHECK
If you sit back and think about where we've come since the March 2009 lows... its truly remarkable. I don't think the FED could have seen it coming out this good! Right?
The only people who hate this low interest rate environment are those retirees who are living on a fixed income, and they are going to be dead soon anyway so who cares about them. You can't vote from the grave.
Right now, with oil prices falling lower and lower, the American consumer is getting more and more money in their pocket. That's bullish.
What I think the main problem is, lies with those who have been conducting business with the assumption that Crude Oil would be trading near $100 or above $100. Not many thought Oil would be where it is today.
I know these companies hedge, but they weren't prepared for this type of move to the downside in oil. What has me concerned heading into 2015 is the aftershocks from this decline in oil. What firms weren't properly hedged? And if oil remains this low, what firms can survive at these lower prices heading into 2015 and 2016?
I think the short term picture for the stock market is rosy. Low interest rates, accommodation central banks around the globe and ever decreasing gas prices to line the pockets of the consumer with fresh cash.
But I think the longer oil stays at these levels, the more we will see companies go belly up, debt not get serviced, defaults, and a domino type affect outside the industry.
Keep an eye on some of these companies heading into 2015. Junk bonds are getting killed in anticipation and where there is one bankrupt company there are likely many more waiting in the wings.