Here we go again! Let's replay things!
The last run up in oil came with rumors that the Russians had reached out to the Saudis for a big oil summit and the Saudis were going to yield. Oil spiked quickly to $32 and change. It took the averages with it and lots of all-clears were sounded.
Then reality and the glut came back to life and oil dropped to $29, and we had one of the worst days of the year.
Then yesterday we learned that Venezuela -- yeah, stupid, hapless Venezuela that has ruined so many quarters -- is now calling for an emergency session to talk about oil prices going higher, and oil jumps 8%.
The stock market -- or at least some of the bigger industrials, all of the oils and some consumer packaged goods stocks -- take off.
So what happens when the Venezuela hype runs the course of the Russian hype, because it is not in the Saudis' interests to take the meeting with the desperadoes from that failed South American country? Do we go back to $29? Does everything go with it, this time led down not just by the oils but by the horrendous financials? (At least I will be talking to John Stumpf from Action Alerts PLUS charity portfolio holding Wells Fargo (WFC) about it).
Is this the time that some oil company defaults on its bonds? Or do we hear a new thesis to propel the stock market? I can weave like anyone, so here goes:
- Oil's really going up because the dollar has stopped going up.
- The drugs can rally because we will be past the House committee hearings on outrageous drug prices, and they were never going to be able to do anything anyway because Congress is pretty much "owned" by the drug companies like it is owned by the "NRA."
- The industrial earnings really aren't all that bad.
- China's Year of the Monkey celebration will kick off and we won't have to deal with China for a few days.
Of course, what all of this leaves out is that each time when we get an oil rally we get fewer stocks to go up. The financials are all acting as if there is nothing going on except the decline in the Deutsche Bank (DB) hybrid instruments (please see the excellent coverage of these by the Real Money team.) Thanks, Credit Suisse (CS), for verifying just how little investment business is really being done right now.
And it leaves out that fewer and fewer people seem to be tempted by the dips and they happen even more viciously, which his classic bear market action.
Plus, what good is a market where you could have a blowout, like Alphabet (GOOGL), a blow off -- up $50 -- and then a total give-up? Why not, unless you are a minute-to-minute trader, wait until the roller coaster ends?
That, I think, is the bottom line. Oil-inspired rallies will soon be viewed with suspicion if we don't see some restructurings of the bad oil companies -- see the Stressed Out index.
In a vacuum, an 8% increase in oil means nothing. You need an 8% increase in oil and gigantic reorganizations and cash infusions into outfits like Chesapeake (CHK) and Freeport (FCX), something that is very difficult to imagine, particularly as natural gas bumps along a 17-year low.
Remember that all bear market spikes are like geysers: they spurt and are breathtakingly beautiful. Then they end, and you are trying to remember why you acted on them.