Well I guess there must have been a 5% drop in crude demand or a 5% increase in supply over the weekend because I’ve seen quite the parade of pundits telling us how speculators don’t affect the oil market.
Needless to say we had another fabulous day, with all our virtual portfolios making progress as we played things perfectly into the weekend but I am most thrilled with a 10% gain in the $25KP, which has had a totally fabulous May after struggling just to stay even in April. We’re still very hedged, hopefully not too hedged, and we will be hoping for a nice, slow rise in the markets, not the short, sharp shocks we usually get.
It was a very exciting day and my first pick out of the box at 9:36 was the FDX $90s, which did quite well, while our other picks like C, JOSB and the QID puts really took off. FSLR fell off a cliff (again) and we even turned around on some of our oil plays, taking calls in CVX and SUN but not with a lot of conviction as that sector got killed today!
Crude dropped $4.71 per barrel, finishing the day weakly at $128.48 but the OIH group made an interesting turn up after a morning sell-off, possibly on the logic that if crude does come down in price long-term, producers will actually have to start pumping more crude to make money but the demand simply isn’t there and that’s not a bet I’d take.
We got the Nasdaq leadership we always love to see with very strong days from AAPL, GOOG, RIMM and AMZN, who make up 12% of the Nasdaq (add just MSFT and CSCO and you’re at just about 25%) and we had a very strong close but it’s the S&P we’ll be watching as they seem to be having a problem with 1,385.
Let’s not forget that we got some pretty bad data in the morning with Consumer Confidence way down at 57.2 (61 expected) and new home sales at just 526,000 while the Case-Shiller Home Price Index for March came in at 172.2, down from the 176.0 in February and 159.2 for the quarter, down from the prior reading of 170.6. That’s a 6.6% decline in housing prices in one quarter and STILL NO ONE IS BUYING!
You would think, looking at this chart, that this would be a bigger story (note the "positive" move in April that you are hearing about) but I guess the media has gotten bored with housing and moved on.
It’s increditble the kind of long-term demand destruction you can get when you charge consumers more than they can afford for a commodity isn’t it?
And what happens when you destroy the long-term demand of a commodity (and let’s not forget we hit "Peak Land" over 5 Billion years ago and, despite all efforts, we have found no substitute)? Well, surprisingly, the price plummets! Check out this bursting bubble chart of the housing market over the past 20 years:
Yeah, that bubble was never going to pop either. That time it was different and we didn’t understand the fundamental changes in global demand and a Billion Chinese people were going to get condos in Florida and there were more millionaires in India than America had people or whatever BS the same "experts" that are now hyping oil used to hype housing just 2 years ago.
Unlike the housing crisis, which sucked hundreds of Billions of dollars out of the hands of consumers, the collapse of oil will put hundreds of Billions of dollars back into the hands of consumers. Hopefully this will be the beginning of a trend that brings oil back down to $80, even if it does take the 2 years it took to for housing to reverse. $50 x 85M barrels a day = $1.5 Trillion dollars a year that can be spent by consumers on things they REALLY want to spend money on – maybe even housing!
