Is 3.80 The Scariest Number For The Bulls?

Tyler Durden's picture

'Nothing can stop us now' appears to be the message we are being fed as Bullard et al. confirm we should rest assured that the Fed will pump as long as there's a sun in the sky. However, there is a little fly in that ointment that just keeps on popping up. As Barclays' Barry Knapp notes, gas prices have risen high enough to hurt stocks if history is any guide. Gas prices, which have risen every day since January 17th are pressuring the critical $3.80 level that has capped valuations for the equity market in the last three years. The last times gas prices have risen this high, consumer spending growth has stalled and just as we have noted previously, it appears the only thing that can tame the enthusiasm of a liquidity-addicted equity market is a cash-strapped consumer pulling back. The double-edged sword is simple, Knapp notes: any slowing of economic growth that stems from higher gas prices may prevent companies from meeting earnings projections; whereas sustained expansion would increase the risk of inflation and put pressure on the Fed to scale back its QE4EVA. Rock meet hard place.


Chart: Barclays and Bloomberg

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
World of Debt's picture

Funny video concerning the world debt crisis!

Mi Naem's picture

Don't waste your time. 

I got about 10- 15 seconds into it, and wished I hadn't waited that long to turn it off. 


NoWayJose's picture

What the Fed really wants is inflation of housing prices, because that will make whole all the underwater mortgages held by the banks. The problem is that liquidity inflation cannot be targeted only at houses, and by increasing gas and food prices, the Fed actually makes it harder for consumers to afford houses - defeating its own liquidity and low rate benefits!

Solarman's picture

Sure the can. It is so simple it is stupid.  Bring all home loans down to 1-2% fixed all owned by the Fed, and at the same time raise interest rates to 1-2% or more.


The conomy is unleashed and there is competition from consumption and the stock market with fixed income returns.  Adjust the interest rates to control inflation over time.


The reason they won't do it, is it screws the wealthy bondholders at the banks.

The Heart's picture

"it appears the only thing that can tame the enthusiasm of a liquidity-addicted equity market is a cash-strapped consumer pulling back."

The cash strapped consumer is who has been tamed. The new in-country thing to do is not drive, stay home on Friday and Saturday nights, make more of the family meals at home from scratch, and eat preserved home grown organics. As planed to control the people, they are well tamed. No money to do anything but barely survive. As far as future projections in the prosperity department are concerned, ain't never gonna happen as long as these critters keep controlling the world by creating wars to cover-up the out of control world domination corruptions, and criminal activities of the evil warmongering profiteers from death and destruction.:

What to do? Follow the leader.:

El_Puerco's picture


If you want to be 10 millions + people watching this...




Tic tock's picture

Firstly, if a central-banker says one thing.... Secondly or whatever, notwithstanding that the price of crude's ever so slightly goal-seeked - also that the US consumer has been out-of-pocket for a little while now, there is no end in sight. At the bottom of the box there's only a couple of grams of gold and your ex-wife's silver earrings. There is no trust, there are no Banks, protection-money to thugs - All Hail Greenspan, first priest of Mammon. But seriously, do 'they' really think that at this point the world is just not laughing at their paltry circus, theat the illusion of a market can be pulled out of hat? They had no understanding when this started, they have no understanding now, and with every lie issued the meek become more united against this lack of justice. They rail harder and focus longer ... like that Tyler Durden and that chick he shacked up with

Nid's picture

Let's see that bearded menace fuck-stick print some 89 Octane unleaded.

Rentier's picture

Gas prices have past and blew through the $3.80 level already...old news here nothing to see move along.

Ribeye's picture

$3.80 a gallon? Lol:)

A litre of juice for the Ribmobile costs €1.70 here, thats about $2.25,

And there's four and a half litres in a gallon,

Yep, that's right, not many Shelby Mustangs gonna be sold in Europe,

About 65% of the price is taxation,

I don't know why you lot are all so afraid of Socialism, it's great:)

DoChenRollingBearing's picture

Three and a half liters per gallon, no?  Still, that's a horrific $8.00 or so a gallon.  Yopeens!  Start taking your bikes!  We're next!  Show us our future...

tom a taxpayer's picture

Rumor is Lance Armstrong is selling a new brand of bikes: the Tour de Farce.

Mark Urbo's picture

His new rubber wrist braclet will be the color of his one and only good test specimen and be very rare to find...

SuSpencer's picture

$7.15 a gallon for diesel here in Poland. Luckily, the mobile averages about 50 mpg and we don't need to drive very often.  We've put less than 3000 miles on it in the last year.  Still makes my eyes water when it says 300PLN to fill the tank...

Westcoastliberal's picture

Which is why in Amsterdam you'll see parking garages full of bicycles instead of car.  I saw one mother on her way to work riding a bike in a skirt with one kid behind her and one in the front basket.  Amazing what people can do to survive when they're forced.

shinobi-7's picture

The price of gas is irrelevant just as the price of oil because it can and is manipulated. What counts is the price of oil extraction especially of the marginal kind. It is going up relentlessly shocking out growth all over the world. Growth is already negative in Europe and Japan. It will soon be in the US. China will take a little longer but not that much. By 2016 “new oil” will be well above 80 dollar per barrel and peak oil will be reality. There will still be plenty in the ground though.

Non Passaran's picture

> By 2016 “new oil” will be ...

Why is this peak oil always few years in the future?
And considering that many here claim and agree that prices of oil and gas are manipulated, what's the point of making any "predictions"?

bugs_'s picture

when my 15 gallon tank times the gas price > 50 its scary even when i'm bearish

DarthVaderMentor's picture

Yes, .380 is a very scary number, whether in SPL or ACP....

ebworthen's picture

The whole economy is such a crock of bullshit.

Gas up, gas down, gas up, gas down.

Robot algos, hedge funds, and pensions in and out of sectors in that order.

Who is getting whiplashed by it?  Why, normal working people on main street of course.

Who is getting rich by whipping the common citizen?  Wall Street and Washington of course.

Don't invest in the markets, don't leave money in the bank, don't put money in an IRA or a 401K or you are just supporting your own slavery.

It is that simple.

joego1's picture

Gas is $4.00 here in northern california. My friend just told me that the state was looking for people with ponds with planes and fining them tens of thousands of dollars. I have a duck pond, God help me. I just paid a bill for "fire services" for $140 because the state decided that I lived in a "fire prone area". The money doesn't go to the fire service it goes into the black hole general fund. It's really insulting to me because I'm on the volunteer fire department. I can't wait for the next barrage of bull shit.

Mediocritas's picture

As energy prices rise, disposable income for consumers decreases, costs for producers increases, margins compress and companies lose the ability to make any money from people buying their stuff, FEAR NOT! The Fed has the answer!!


-- Who the hell needs such quaint, antiquated concepts as "customers", "products", "services", "sound management", or a "business model"? That stuff is all just a pointless cash-burn and requires yet another obsolete concept: "employees". What a waste, just liquidate them all. Make money from issuing more shares instead, there's a permabid guaranteed by the Wizard himself!


-- Worried about diluting your shareholders and getting a bad name? Don't be, the boomers who are dumb enough to hold your shares through dilution were cutting back on buying your shitty former products anyway, so consider this justice. You'll get their money one way or another. Pretty soon you'll only have 5 shareholders left (banks) but fear not because they don't care about being diluted when the Fed's giving them free money.


-- And you know the best thing? The more you push it and the more you turn your former real business into a vapor scam of just one dude issuing more shares in perpetuity, the more you'll attract those idiotic short-sellers like moths to a flame, you know, the ones who still think that running a sound business is required in order to be profitable. HAHA suckers!


-- Suck those bears in until short interest is about 70% of your float, then use some of your left-over cash from the last issuance to buy back some stock with big dumb blocks. You'll attract all the heat-mapping robots and they'll do you the service of hunting all those bears' stop-losses for free, creating an epic short-squeeze in the process that pulls in the rest of the bots and some fresh sucker bulls. Your 5 shareholders will love you, allowing you to then dilute them (and the fresh meat) once more at the top. Rinse and repeat. Only the losers lose, suck it losers!


-- It works great until the 99.9% of people who aren't in on the scam start losing all hope because they can't afford to buy even food. They'll eventually pull out their guns and overwhelm whatever is left of the police force that you were buying off so cheaply up until now, but hey, you've already got your overseas gated community locked and loaded with a bug-out Learjet on standby, so fuck 'em, fuck 'em all.


-- They won't come after you because they're too ignorant to know who to blame. Wait until they're done shitting in their own nests and then return to re-conquer.

/sarc off

tip e. canoe's picture

awesome chart tyler.   and mad props to ekm & steve from VA for drilling the point into me skull.

it's all about the petrol bitchez.

q99x2's picture

They are dropping the price again.

ozzz169's picture

correlation is not causation both are predominately driven by overall economic conditions. you could argue that 3.80 causes economic instability, but that is not very logical, people dont just say oh there is 3.80 a gallon I am going to stop spending money... its much more continuous, and in fact people adjust slowly over time to higher gas prices and each time reach the high levels the impact will be less. in fact it looks like the s&p is the more forward looking of the 2 and leading the gas prices, which makes intuitive sense as well.

DutchR's picture

"Is 3.80 The Scariest Number For The Bulls?"


No, it's .308



Bagbalm's picture

I don't see any lag in the chart. Perhaps an unseen third factor is driving them both. Or perhaps gains in the market drive up gas prices.

NEOSERF's picture

$3.65 is the new $3.80 now as my real income has declined over the last several years.

MeBizarro's picture

Looking at the price of gasoline in the US tells you little about the economy and more importantly energy markets.  The real issue has been the marginal price of extraction for producers and suppliers who need oil above at least $60/barrel to make any deep water rig profitable enough for extration & $80/barrel to make the tar sands and shale (closer to $90/barrel) oil in the US.  

If you look since 2000, global oil production levels has barely increased despite double digits annual rates of global investment in extraction prior to the downturn in '08 and again in '11 and '12.  That's the crux of the problem where is it is taking more and more invest dollars just to remain current levels of extraction.  It means the price remains high stunting overall economic growth and sucking up additional dollars that could have gone into savings or other investments.  

What the Fed and Central Banks are doing to currencies is largely just a reaction to this problem.  The most ridiculous part is when you here all of the idiots who have latched on to the idea that fracking in the US is going to make us 'energy independent' including from oil.  There is complete and utter nonsense yet it has obtained serious viability among the economic community and even the public.  Only thing fracking does at best is temporarily put a bandaid on a festering wound and one that doesn't last long given incredibly fast depletion rates from natural gas wells derived from fracking.  It might buy the US 10-15 years at the most and that is only if we go full-bore. 

robertocarlos's picture

I need about tree fitty.

Westcoastliberal's picture

Pumped in $50 worth of unleaded regular @ $4.29 a gallon yesterday.  Not enough to even fill the tank. Our here in the exburbs of LA, I'm doubtful commuters can stand this much longer.