Another Exciting Week Ahead
By: Tim McPartland,
It is likely that we will have another highly exciting week this week–maybe not up to last weeks excitement, but one with potential for big moves.
Tonight we kick off the earnings season with Alcoa announcing then the avalanche of releases comes daily for the next few weeks. We don’t believe that anything of real consequence will be learned from these earnings, but the mainstream financial press is playing it up big time (as always they have to create something to talk about even when it is low excitement). Just like the last number of quarters any given company may skyrocket or plunge based on the earnings they release, but we don’t believe it will move markets–and that is what we generally care about.
The week will still be about oil prices and global economics. Oil prices will likely remain very low as more folks proclaim that crude is heading down more because production remains high and while this could be a contrary indicator we don’t think the lows are in as of yet. Global economics will remain in a down trend. The ECB is scheduled to announce their ‘QE’ in 10 days and that could give a massive shove to the markets. No QE and global markets will tank. Modest QE will also likely tank stocks worldwide as everyone is hanging their hat on a helpful program–what a joke. QE did little the last number of years in the U.S. and it won’t do anything for Europe, but it is perception-not reality that drives these situations.
A couple words on oil. Crude is off almost 4% again this morning and we are reading more and more on the consequences of this pricing crater. In particular the big oil states such as Texas and North Dakota are going to see giant cuts in state revenues as production starts to taper off. Additionally, we are reading about small companies that supply the industry starting to either go bankrupt as orders are cancelled or starting to cut back on spending. We have continually mentioned we believe that the consequences of lower crude prices will be much more destructive than is being talked about. The contagion will be substantial and damaging–the benefits to the consumer will not outweigh the high paying job losses etc. It will take a few more months before this becomes apparent to the mainstream financial press–it is coming and it will carry severe consequences.