How can you not? How can you not see the positives of what lower oil can do for countries like China, like the U.S.? How can you not model them in?
That was pretty much the thinking behind a lot of the positive read through we got from Klaus Kleinfeld and Alcoa (AA) last night. While the world is full of woe-is-me talk about the imminent bankruptcies of oil, he's talking about the confidence-building he is seeing and how there are some very big growth ramifications to the consuming nations that aren't being thought about enough. He's talking about the possibility of a pretty instant reaction in consumption that's occurring.
Some of that is reflected in his decision to take up his forecast of the growth rate for aerospace -- now it has the possibility of being double digit. Some of it is the growth in non-residential construction that he already sees happening here.
But most of it is a recognition that consumers with a zero savings rate, like we have in the United States, will spend every dime of the money they get. Meanwhile energy consumers, like Alcoa, will be able to make everything for less, but nothing's being rolled back.
I now when oil goes through $40 there will be some big restructurings coming. But if you listen to Kleinfeld, you recognize that what you are really getting right now is a revival of U.S. growth, in part because of energy but, more importantly, a decline in Chinese growth that won't be as bad as people think and a definite boost to European growth that he thinks isn't being factored in.
Now, Klaus has been a bull. But, you have to ask yourself, what the heck is wrong with that? In his business it has paid to be a bull. He is not a pontificator, he is an operator and he is looking at his operations and other than soda cans, they are on the upswing.
It is always hard the day after Sandisk (SNDK), Tiffany (TIF) and American Airlines (AAL) report soft numbers to believe that anything good will come of this earnings period. But won't autos, trucking, non-residential construction, turbines and aerospace getting stronger make up for diamonds, flash memory and a sluggish revenue number from a company with a very big international component to it?
I am not saying that we aren't in for ups and downs. I am saying that when we are in the downs don't forget that a company with a lot of industrial tentacles is already seeing the positives of lower oil and wants it to go lower still, even as he knows exactly that some producers will get hurt here, maybe badly. But never forget, as we head toward my $40-43 target, there are a heck of a lot more consumers than there are producers.
- Random musings: Is Nordic American Tankers (NAT) a continuing good spec? That last dividend boost might be for real if this oil price stays where it is or goes lower, as lots of speculators try to catch a bottom with a little fill-up!
