Stocks are struggling to bounce today as supply concerns on oil pushed prices to over $135/barrel overnight.
The relentless rise of oil is putting the economy on the brink of a collapse. The airlines are in deep trouble if this continues. Expect a BK or two among the major carriers if oil prices stay at these levels or higher.
Ford also came out today and announced they will only break even in 2009 versus their previous forecast of turning a profit. They are being forced to get out of the profitable SUV business and turn their production more towards smaller cars due to higher oil prices.
Oil is the story on the street short term. There was a report on CNBC today that said gas prices will go to $4.61/gallon if oil goes to $150/barrel. Ouch!
I expected a bit more of a bounce today after two brutal trading sessions. Expect the market to struggle big time with oil at these levels.
Richard Bove
I find this research report from Richard Bove amusing because this was the same guy who said buying financials a few months ago were a "generational buy" for investors.
Well I guess a "generational buy" now lasts 2 months on Wall St. Bove put a "sell" rating on Lehman today and downgraded all of the investment banks. Here is Bove from Bloomberg:
"May 22 (Bloomberg) -- Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Goldman Sachs Group Inc. had their stock ratings and price estimate cut by Ladenburg Thalmann & Co. analyst Richard Bove on concern that earnings will falter.
Goldman Sachs, the largest securities firm by market value, Merrill, the third-largest U.S. securities company, and No. 4 Lehman were reduced to ``sell'' from ``neutral,'' Bove said in notes to clients. Merrill and Goldman face disruptions in cash and ``hedge'' markets, while Lehman's bets on financial indexes to offset writedowns may have backfired, he said."
My Take:
Does this guy look like a fool or what? I agree with his revised call of course, but he needs to make up his mind! Is it a "generational buy" or is it a "sell" on the financials?
Analysts can look like fools when bubbles are bursting.
Keep an eye on oil today. The market is a hostage to it right now as long as oil holds at these levels. Something has got to give folks, and with a weak dollar, I am guessing its the market.
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Bill Gross from PIMCO comments on inflation:
"Today's world, including its inflation rate, is changing. Being fooled some of the time is no sin, but being fooled all of the time is intolerable," Gross said.
"Join me in lobbying for change in U.S. leadership, the attitude of its citizenry, and (to the point of this Outlook) the market's assumption of low relative U.S. inflation in comparison to our global competitors."
Yikes! When he is scared we all should be. He also advised everyone to invest outside of the US.
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