Moments ago, following the DOE report of an unexpected jump in oil inventories which caught all algos by surprise, oil collapsed to a $40 handle...
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...a price not seen since 2009.
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So what does this mean for S&P 500 earnings in general, and energy earnings in particular?
Nothing short of much more pain, if not a complete wipeout, as the following chart - showing energy EPS with a 4 month lag vs oil prices - from Citigroup reveals.
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Which, as we also reported two days ago [7], means forward energy multiples are about to explode to record highs and, as we also commented, if and when the realization arrives that forward multiples in the 25-30x range are just a "tad high" and multiples mean revert, watch out for a 50% crash in energy stock prices...
[8]
... which after a year of hopium courtesy of central banks, will finally metastasize to the rest of the S&P 500.
