Oil drops below $50, as Wall Street takes a New Year header

Oil's lowest per barrel U.S. futures price since 2009 picks up where Friday’s market downside left off.

Here's one kind of header. Wall Street's taking a different kind today.
Here's one kind of header. Wall Street's taking a different kind today. (Via Wikipedia)

WASHINGTON, January 5, 2015 – Stocks began trading this morning where last Friday’s light trading day plunge left off. As of the 1 p.m. hour (EST) Monday, the Dow is off 325 points, with the broader-based S&P 500 down 38 and the tech-heavy NASDAQ off over 70 points−a colossal hit.

Most of today’s plunge seems due to fallout from the resumption of selling in the energy sector, with U.S. crude futures dropping below the current, mythical $50 floor, albeit briefly. That’s oil’s lowest per-barrel price since 2009, the last time the world was coming to an end.

It’s funny, but the moronic financial press continues to harp on how terrible this is for the economy and the consumer. Funny, but on a New Year’s Weekend trip up to not-so-sunny Cleveland, Ohio, the Maven filled up the tank of his doddering 2003 Saturn VUE at the astonishing price of $1.81 per gallon.

New York-based talking heads may think differently about this, but the Maven was almost jumping for joy as he topped off his tank just south of the city that will host the Republican National Convention in 2016. When did we see prices like this? In this century?

Sure, some wildcatters will go right out of business if this keeps up much longer, making the Saudi Islamocrats happy. But larger companies in the oil patch will simply stop drilling, batten down the hatches, adjust for lower prices (meaning, alas, some layoffs). Airline companies will experience greater profitability, perhaps even leading to lower prices just in time for cheaper international vacations this spring and summer as the dollar powers higher.

Transportation companies will have higher margins, and the delivery of all kinds of products would—or should—become modestly more reasonable. Since U.S. corporate fat cats have been paying themselves fat bonuses and big raises rather than passing profitability along to their workers in the form of noticeable wage increases, the oil price drop is providing those missing raises instead. We fail to see how this won’t make American wage slaves even happier after 6 straight years of miserable Obamanomics.

Okay, sure there could be some short-term collateral damage here in some business sectors. But just exactly why we should be horrified that the middle class—or what’s left of it—is finally getting a break is quite beyond the Maven’s reasoning abilities. And after all, if the past gives us any clue, this drop in oil and gas prices is not likely to continue forever before things start moving up again.

So gather ye rosebuds (or cheap gas prices) while ye may, and let’s have some fun for a change.

Wall Street has other ideas at the moment as we’ve just noted. Nearly everything is getting killed in sympathy with oil prices, proving that Wall Street remains its good old irrational self, likely driven further that way by high-frequency trading (HFT) algorithms that trade on headlines, not fundamentals.

But things should sort themselves out soon, after the current oil shock, the possibility of yet another EU false QE promise, and the fair likelihood of a Greek Socialist vote and that country’s subsequent move out of the Euro take place.

So we’ll sit still for now while getting ready to execute a few 2015 portfolio exchanges, which we’ll begin to explore today or tomorrow in our companion “Prudent Man” column.

A list of coming attractions:

  • The 2015 Dogs of the Dow listing, plus a new ETF way to play this game
  • The final tally of the Maven’s performance in his 2014 Year End Bounce Back Stocks
  • The Maven’s new lists of 2015 Year End Bounce Back Stocks

So stay tuned to both our columns. The way things are going, we may all be able to pick up on our favorite 2015 stocks at truly bargain basement prices.

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