Oil Down… Sentiment Up… Stocks Up… Duh

The price of oil came down in August.

 

Consumer sentiment went up… apparently to some economists’ surprise.

 

     "The Conference Board said Tuesday that its Consumer Confidence Index improved slightly to 53.5, up from a revised 51.0 in July. Economists surveyed by Thomson Reuters had expected 50.5.

 

Obviously, I think there’s a correlation.

 

     The improvement, which came after two straight months of declines, caused stocks to reverse their losses and move into positive territory."

Obviously, I think there’s a correlation there, too.

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Are Stocks Cheap or Expensive?

A few articles came out today (AP; WSJ) about stocks being dirt cheap… because projected P/E ratios are as skinny as they were during the March 2009 lows.

 

The counter to this is the number is low because projected profits are unrealistically high.

 

What am I looking at?  Comparisons.  Q1/Q2 2009 was absolutely awful… so Q1/Q2 2010 looked pretty good in comparison. 

 

But Sep/Oct/Nov/Dec 2009 rebounded fairly impressively… which should be ok for Q3 comparisons (Jul and Aug 2009 were still pretty weak)… but is going to make Q4 2010 comparisons a challenge.

 

Oil prices — in this situation — aren’t much help.  Normally lower oil prices mean a bit more money in people’s pockets and, thus, more spending and more corporate profits… and higher oil prices means folks start clamping up again and, thus, less corporate profits.

 

But oil prices seem to be able where they were last year… in the 70’s. 

 

And we know more spending money isn’t coming from brand new shiny jobs or home equity appreciation.

 

So, in general, I’m not sure where the extra dollars are going to come from to fuel the anticipated spending growth.

 

Interesting enough, Intel already lowered formerly raised profit expectations on Friday…. which would support that observation.

 

With oil inventories sitting at all-time highs, though, there is still a chance oil prices will start to drift downward… and that, of course, will make corporate profit growth estimates more likely. 

 

In fact, a downward oil trend may be particularly bullish for stocks in Q4 2010/Q1 2011 given oil prices started climbing into the 80’s in Q4 2009, touching the 90’s in April 2010. 

 

In other words — comparatively speaking — people may actually have a bit more in their pockets to spend.

What will happen?  Watch oil prices over the next few months to find out.

The GM Investment Is Still Not Working

I really, really want to say kudos to GM for getting their act together.

 

But, truth is, I still feel the same way as I did last June when I wrote, "The GM Investment Won’t Work"… regardless of whether they are contemplating an IPO or not.

 

Need more proof?  We (the U.S. tax payer) were forced to invest in GM at what will be the equivalent of $141 per share. 

 

Think we’re ever going to see that price in our lifetime?

 

Not only would I not invest in that… but I wouldn’t even bet on it if I got odds.

 

Again, like my last blog post, nothing would please me more than to be wrong about this one.

 

 

P.S.  CNBC posed the question, "How much will a share of GM have to sell for for the U.S. to break-even?" during this morning’s show… I back-of-the-enveloped it at $140… so I’m feeling pretty damn pleased with myself right now. <smile>

Sometimes I Feel So Naive

In the very earliest days of the Internet, I naively clicked on the link at the bottom of a spam that said, "Please take me off of your mailing list."

 

Of course, this is what the spammers wanted… for me to verify that they had indeed sent an email spam to a valid email address.

 

Boy, did I feel stupid when I figured this out!

 

I just read an article about mortgage fraud… and, while I haven’t fallen for such a ploy this time around (at least that I know of!), I must say I feel equally as naive… the fraud that’s going on is so simple and effective that I again feel silly I hadn’t considered the possibility.  Frightening.

Another Black Eye

I’m all for education.  But our education system is BROKEN and throwing money at BAD TEACHERS and a BAD INFRASTRUCTURE will simply make a BAD SITUATON…

 

… WORSE.

 

Another black eye for the Obama administration.