Helloooo Everybody!!!
After watching the markets today, I feel like a kid who just got off one of those amusement rides that goes around in circles. Lots of news that got things spinning with relatively nothing to show for it.
Trading will probably be fairly slow until the Fed speaks. The financials continue to get slaughtered. They dropped more today than Friday when the DOW dropped 200 points. To see the DOW hold up when the financials fall apart is very rare.
Energy stocks helped pick up the slack of the financials as oil rose. The Saudi announcement of increased production did squat from stopping the massive bull run in oil.
My best guess is oil goes way higher from here guys and gals. This bull move is multifaceted, and I believe oil has replaced gold as the new hedge against inflation.
The traders in the oil pits claimed the Saudi news didn't help things because they don't make much light sweet crude. This is the oil that's in highest demand. I don't believe that for a second. There are many reasons oil is heading higher. $200 is not out of the question as demand continues to be sky high.
If you can't afford gas at these levels, then you better go buy a smart car or a scooter.! If thats not an option, move closer to work. This is a long term trend folks.
UPS Warns
Lets get to the big after hours news. UPS was halted and then came out with a profit warning.
"June 23 (Bloomberg) -- United Parcel Service Inc., the world's largest package-delivery company, lowered its second- quarter profit forecast because of rising fuel costs and a slowing U.S. economy.
Earnings will be 83 cents to 88 cents a share, down from a forecast of 97 cents to $1.04, Atlanta-based UPS said today in a statement. The average estimate of 16 analysts surveyed by Bloomberg was 98 cents.
UPS said the ``anemic'' U.S. economy was causing customers to cut back on air shipments, its most profitable offering, and that international packages coming into the U.S. were also declining. The company didn't provide volume figures."
My Take:
What disturbed me with this warning was the reason for the earnings shortfall. You would have assumed that UPS would be warning because oil prices ate into their profits.
However when you read the warning from the company above, oil was not the reason they guided lower. They are blaming the "anemic" US economy for their earnings shortfall.
UPS, like Federal Express, is a bell weather to gauge how the economy is doing. The fact that they are blaming this on the consumer is a big red flag.
I was expecting many companies to blame oil over the next couple quarters for missing their earnings because its an easy way out when facing the heat from the analysts. Retailers are famous for blaming unusually warm or cold weather when they miss earnings.
I laugh whenever I hear retailers talk about the "unusually col" April/May that slowed down summer sales. Excuses are like ***holes. Everybody has one.
UPS flat out told you how the consumer is acting. I give UPS a lot of credit for being honest on why things are slow. Its tough to tell analysts that the reason you are hurting is because your core business isn't performing well. They could have easily blamed this on oil. Kudos for their honesty. Its rare on Wall St. these days.
Bottom Line
We are getting attacked on several fronts as this economy starts to dive into a deep recession. Gas is through the roof, inflation is out of control, interest rates are rising, defaults on all types of credit are rising at an alarming rate. The banks are crippled and cannot lend. Did I miss anything?
Hold on tight folks and protect your money. Get out of debt as fast as you can. Put your portfolio into treasuries and CD's if you can't sleep at night. Make sure you are at least diversified with your investments.
Things are deteriorating rapidly. UPS just told you so.
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