What Does Oil Know That Stocks Don't?

Tyler Durden's picture




 

With West Texas Intermediate crude oil trading with an $80 handle, near two year lows, while stocks remain within a few percent of their four-year highs, one has to question just what it is that stocks believe about our bright new future of growth and demand that the all-important energy markets do not. Between Europe's recession, last night's dismal China PMI, and a significantly trending rise in US unemployment claims, it seems more likely that the global demand picture painted by the oil market is a better reflection of reality than the earnings/multiple picture painted by the nominal price of US equities. We know that bad is good when it comes to the front-running of Bernanke's print button but wouldn't bad being good raise the USD-nominal price of oil also?

 

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Thu, 06/21/2012 - 09:33 | 2546721 FieldingMellish
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Not just black gold, gold gold and just about anything else dug out of the ground or grown.

Thu, 06/21/2012 - 09:42 | 2546761 vast-dom
vast-dom's picture

no one, no thing, knows anything right now. and it shall remain that way until there is a reset.

Thu, 06/21/2012 - 09:55 | 2546812 LawsofPhysics
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Either way, you will still need energy to do or grow anything, including a reset.

Thu, 06/21/2012 - 10:06 | 2546881 vast-dom
vast-dom's picture

zombies need to drive and ammo to fire, for the reset apocalypse. but some of that won't be transacted in fiat. some of it will be exchanged for lives and some for bullets. 

Thu, 06/21/2012 - 10:14 | 2546909 Pinto Currency
Pinto Currency's picture

Market prices for many commodities are being are being artificially influenced with derivatives.

For instance, demand for physical gold is enormous but the price drops. 

This setup will work until assets available for sale at artificially low prices dries-up.

Supply and demand is being decoupled from market prices in many cases breaking market functionality.

Thu, 06/21/2012 - 10:15 | 2546941 Alea Iactaest
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Drop in oil from $105 to current levels is more stimulative for the ecomomy than ANYTHING else (Fed or otherwise).

Thu, 06/21/2012 - 10:31 | 2547020 LawsofPhysics
LawsofPhysics's picture

Right, that must be why so many firms are hiring.  < sarc off >.

Thu, 06/21/2012 - 11:13 | 2547260 JimBowie1958
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Could it be that the financial industry is suffering from a kind of financial cramp? The lack of credit is turning the economy downward and the downward economy is discouraging banks from extending credit?

This would also seem to encourage banks to put their funds into more secure objects, or at least that look more secure. So bonds might look attractive now, for our banks and the European banks and governments also. Wouldnt this push up the value of USD?

If USD goes up, then wouldnt that make stocks denominated in USD go up and gold go down when priced in USD?

Thu, 06/21/2012 - 12:42 | 2547646 LawsofPhysics
LawsofPhysics's picture

A strong dollar making stocks go up?  Really?  Someone else want to educate this guy, I don't have the time.

My money is on the rest of the actual producers, creators, and innovators realizing that financial sector has been fucking stealing the value of our labor for fucking years.  These paper-pushing fuckers add no real value, let the fuckers die.  Just now realizing that a stable monetary system requires that there are real fucking consequences for bad behavior are we?  Welcome to the real world, paper and bullshit promises are dead.  You have nothing to fear unless the real value of your labor is zero.

Thu, 06/21/2012 - 12:48 | 2547675 blunderdog
blunderdog's picture

Agree with the sentiment of the rant and all, but just to nitpick: a strong dollar can benefit "value-add" middlemen who do nothing but buy cheap imports, mark them up, and resell them. 

The whole damn problem with economics is there're two sides to everything.  A business like The Container Store or Pier 1 might do better with a strong dollar.  If those $20 woven baskets from India costs go from $1.50 to $0.75, that's an extra potential profit.

Thu, 06/21/2012 - 14:17 | 2548069 Bicycle Repairman
Bicycle Repairman's picture

Oil and stocks know the same thing: it's an election year.

Thu, 06/21/2012 - 14:35 | 2548140 LawsofPhysics
LawsofPhysics's picture

Contradictory statement there dude.  How will anyone shop at those stores if they have been laid off because it is cheaper to manufacture in another country?  FAIL.  Wages fucking matter.  If your customer is broke, guess what, so are you.

Thu, 06/21/2012 - 17:37 | 2548891 blunderdog
blunderdog's picture

That's stuff I didn't comment on, but I know you like to be a dick about things if anyone ever disagrees with your proclaimations.

The big problem with virtually ALL business in the USA at the moment is that the customer is broke.  Duh.

What do you expect from a concerted effort to drive down wages for 40 years?

Even a blind deaf dumb squirrel finds a nut now and again.

Thu, 06/21/2012 - 16:05 | 2548544 JimBowie1958
JimBowie1958's picture

A strong dollar making stocks go up?  Really? 

Well, foreign investment would be drawn to American stocks if the USD is going up as they get a double benefit from increase in the stock value times the increase in the currency value relative to the native currency of the investor.

I have the impression that most stock trading today is done with short term gains and losses in mind and relatively few invest with an eye on the value of the company stock over more than a few years at most. So wouldnt that make the underlying economic performance diminish in impact on the day to day prices of stock?

By analogy, say I buy and sell used cars between dealerships, why do I care if the car works long after the lemon law expires for that sale? I have made my money and from a finincial/profit perspective, it impacts me very little if the used car from time to time turns out to be a lemon.

The folks buying stocks today leave me with the impression it is all about buying low and selling high TODAY with little regard for classic long term investment. So yes, it would seem that such traders would benefit from a rise in the USD value and very plausibly so.

But obviously I am not a proffessional trader, just merely a diletante, so I could be totally wrong. If so it would be appreciated if someone could tell me why my thoughts here are off target.

Thu, 06/21/2012 - 10:32 | 2547033 roadhazard
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Exactomundo. The problem is that at any wiff of growth speculators will pump the price back into recession. It happens every time and there is no way out.

 

God bless America

Thu, 06/21/2012 - 10:52 | 2547077 roadhazard
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:post moved:

Thu, 06/21/2012 - 10:55 | 2547158 blunderdog
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Who derives the big benefit from cheap OIL? 

If gas prices at the pump aren't affected, it's not immediately clear what kind of stimulus that means to the USA.

Thu, 06/21/2012 - 14:09 | 2548042 smlbizman
smlbizman's picture

wholesale gas at 2.55+ -....should be 2.95 +- at the pump....3 at the most

Thu, 06/21/2012 - 10:11 | 2546898 Pinto Currency
Pinto Currency's picture

-

Thu, 06/21/2012 - 15:01 | 2548228 CPL
CPL's picture

> including a reset.

Very true.  A car needs breaks to slow down a metric tonne of steel traveling at 120kmph, the energy to create the friction has to come from somewhere.  

Thu, 06/21/2012 - 09:57 | 2546835 tarsubil
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If you can print money, then you can control prices somewhat with what you buy with the printed money until the money dump is internalized by the system. Sort of like pouring solvent into a super saturated solution. There will be local low concentrations where the solvent is dumped before the system tends towards equilibrium.

Printed money is being used to buy stocks but not oil? Printed money is being used to short oil? Who knows?

Thu, 06/21/2012 - 10:01 | 2546860 LawsofPhysics
LawsofPhysics's picture

Not quite.  You can control prices with printed paper so long as there are sellers.  When no-one wants to sell you their assets or commodities because the paper is worthless, then you have a fucking problem.  History shows this over and over.

Monetary systems last only as long as there is real fucking consequences for bad or unethical behavior (where is John Corzine?).  When the faith in paper is lost, you are fucking done.

Thu, 06/21/2012 - 10:05 | 2546883 tarsubil
tarsubil's picture

That would be like the super saturated default.

http://youtu.be/0wifFbGDv4I

Before default, you can add solvent to the system. After default (you can literally flip the flask upside down and nothing will happen), the system doesn't so much care about the solvent anymore.

Thu, 06/21/2012 - 10:31 | 2547030 LawsofPhysics
LawsofPhysics's picture

Total bullshit, especially since the "paper" you refer to is imaginary.  It is a fucking electron on a computer chip.  Even the solvent is fucking real, you can't do shit if you run out of solvent. Try a better metaphor.

Thu, 06/21/2012 - 11:27 | 2547258 tarsubil
tarsubil's picture

I love that metaphor so I tend to stretch it a little. Thanks for being so cordial. I do think that the original idea that you can manipulate prices "somewhat" (might want to look and see that I used that word originally to qualify the statement) with printed money is correct and somewhat obvious. Your stating of the endpoint loss of confidence in money where you are no longer able to manipulate prices doesn't really refute what I said and is a state that we are not at right now. I can buy real wealth with imaginary electrons right now. So your point about the ultimate endpoint which I agree with, doesn't really change the fact that people can print money and imaginary electrons right now and buy stocks and the price of stocks will go up right now.

And more than that! I like that metaphor because it shows how fragile the system is. And the system is very fragile right now.

Thu, 06/21/2012 - 12:45 | 2547657 LawsofPhysics
LawsofPhysics's picture

...so long as the paper is accepted.  how long do you want to keep this cicular mental masterbation going?  Let me know when you have some real solutions.

Thu, 06/21/2012 - 10:57 | 2547171 WatchingIgnorance
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Well said.

Thu, 06/21/2012 - 10:00 | 2546853 withnmeans
withnmeans's picture

Oil and Stocks "No Nothing", however the Banks and Big Government do. The Big Government gives the Banks the money and say run with it BOYS, prop up the market to make it look good. As for oil, the Government tells them to stay the hell out "The Price has to stay DOWN" or the people  "Ah'mmm SHEEPLE" will revolt.

 

So, over all when the MSM look at the ole BOOB tube "ALL IS GOOD" and they carry on like bee's flying their asses off but finding NO flowers.

 

Carry On Gentlemen, and Ladies ! Nothing new here !!!

Thu, 06/21/2012 - 10:09 | 2546871 vast-dom
vast-dom's picture

you are misquoting -- must be dyslexia -- i guess JPM knew everything when they made their hedges on hedges, huh? i guess Bernank knew how to correct unemployment and rescue the housing markets? the only thing they all do know is they are addicted to liquidity and must have it in order to remain addicts. that they (k)no(w).

Thu, 06/21/2012 - 10:50 | 2547131 withnmeans
withnmeans's picture

Thank you Vast-Dom, Hmm 2 things... Yes, I am dyslexic, it sucks. The other, thank you for pointing out my typo "know", was in a hurry "busy day for me".

Although not misquoting, the Markets are propped up for a reason, as oil is down for a reason. I was only making light of the fact that we "and I say that lightly, I don't think for the most part ZH'ers are" are being played.

We could break it down Bank by Bank, does it matter "NO"!  As for Bernanke, all of his work will not be forgotten in the annals of time, to be picked apart by scholars to find out what went wrong. 

Hind sight my friend will be 20/20

 

Good Day !

Thu, 06/21/2012 - 09:46 | 2546770 Eireann go Brach
Eireann go Brach's picture

Some folks that wear towels on their head and sometimes wipe their own asses with them too, are doing Obama a favor by driving the price of oil down to help his re-election efforts! Who might this be and what favor will Obama owe them back is the question?

Thu, 06/21/2012 - 09:57 | 2546824 LawsofPhysics
LawsofPhysics's picture

Has been going on for over a hundred years,  do you have a fucking point or should you moniker be changed to "obvious man".

Thu, 06/21/2012 - 11:01 | 2547194 Eireann go Brach
Eireann go Brach's picture

I am sorry that you feel that way, if I woke up and looked at your fat wife everyday too, I would fucking hate myself too!

Thu, 06/21/2012 - 11:05 | 2547224 LawsofPhysics
LawsofPhysics's picture

What an intellectual response. Thanks for confirming that you are just another idiot troll.

 

Don't like the truth?  Try the blue pill next time.

Thu, 06/21/2012 - 09:59 | 2546851 battle axe
battle axe's picture

The real question is, "What does Exxon Mobil know that we do not know?" Lulling the US populace to sleep before we wake up to Israel/Iran? Only the Shadow knows (that would be Big Oil). 

Sun, 06/24/2012 - 18:07 | 2556463 sun tzu
sun tzu's picture

What you think is big oil is nothing more than a pimple on the but of an elephant. Saudi Aramco is ten times bigger than Exxon and Chevron combined. All of "big oil" combined is about 5% of the world's petroleum market. 

Thu, 06/21/2012 - 10:01 | 2546863 whatsinaname
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Oil knows that there is an election coming up soon.

Thu, 06/21/2012 - 10:32 | 2547036 Spastica Rex
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But what does Oil care who gets "elected?" The dogs are fighting, but they're all owned by Michael Vic.

Thu, 06/21/2012 - 11:09 | 2547228 CrashisOptimistic
CrashisOptimistic's picture

Oil scarcity will remain regardless of who is elected.

Oil scarcity crushes the economy, which crushes oil consumption, which lowers the price.  If economic activity dares to increase, the price will viciously spike once more and smash the attempt to increase.

This is what oil scarcity looks like.  The price is determined by consumption, which will forever now be lower than demand -- and that is the key point of the whole concept.  Demand and consumption will never again be equal, which defines the failure of economic thought from now on.  If you attempt to use more, the extraction rate from the ground cannot compensate.  Up goes price to destroy the attempt.  When the attempt fails, down goes price.

It is this which has caused the destruction of the planet's economy, and it's forever.  It is Occam's Razor -- the most simple and straightforward of explanations.

Thu, 06/21/2012 - 10:35 | 2547054 jekyll island
jekyll island's picture

Stocks know that inflation is coming.  Quickly.  

Thu, 06/21/2012 - 10:19 | 2546974 Stochdoc
Stochdoc's picture

Large increases in supply and reduced demand = much lower prices.  We saw this movie in the 1980s.

 

Plus, Saudi incentives to keep the pressure on Iran and Russia thereby impacting their ability to support that asshole Assad.

Thu, 06/21/2012 - 11:39 | 2547391 rotagen
rotagen's picture

The one post that sums it up...someone already made.  Oil is Real, Stocks are Fake.

Thu, 06/21/2012 - 11:54 | 2547484 short-swap
short-swap's picture

I think it is interesting to note that Oil 'decoupled' from equities right around the time that Oil was rising so high that even the mainstream media was calling out 0bama for lack of action regarding higher gas prices. It was around this time that b0 said it was 'speculators' causing the spike in prices and that the prez couldn't really do anything about it. Coincidentally....the price of Oil and Gasoline started to fall dramatically....Saudi Arabian side-deals aside...

Thu, 06/21/2012 - 09:32 | 2546722 GeneMarchbanks
GeneMarchbanks's picture

It knows how to go down when needed for one.

Thu, 06/21/2012 - 09:34 | 2546725 VonManstein
VonManstein's picture

well at least stocks are up

Thu, 06/21/2012 - 09:44 | 2546769 JPM Hater001
JPM Hater001's picture

Have you ever seen a water balloon slingshot?  That's what the market is but instead of shooting up it's pointing straight at the ground...

And they are still stretching.

 

http://youtu.be/zNe2w3kXRO4

Thu, 06/21/2012 - 10:34 | 2547047 Spastica Rex
Spastica Rex's picture

Wow - there's a macho way to spend time in the local park.

Thu, 06/21/2012 - 09:34 | 2546724 CreativeDestructor
CreativeDestructor's picture

with so many what does [____] know that stocks don't, better question is what do stocks know that no-one else on this planet does?

Thu, 06/21/2012 - 09:36 | 2546739 CreativeDestructor
CreativeDestructor's picture

and i'll answer myself: stocks know fuckin'hope. that's tight fuckin'hope!!! Hope can't be measured by dcf models, it's just something you have when you look in the eye of Benocide.

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