There's always something going wrong. Think about all that has gone wrong within the last eight months: a U.S. debt downgrade, prospects of failure among major European banks, Italian bond yields spiking. Spanish bond yields spiking, Greece repeatedly ailing and a U.S. government shutdown narrowly averted.
We sold down and we sold down hard on all of those. Every last one of them. In each case we got hammered once going in and then we got hammered again AFTER the actuality. There was a total inability to discount once. We always discounted twice.
Now we come in and gasoline is exceeding the all-time high, the price per barrel is showing no signs of a slowdown and we aren't getting hammered? The market's not getting crushed like in 2011 and, somehow, that's incredibly unnerving to people. That's right, that's what's got the intellectuals and the pundits in an uproar. Where's the discounting of what's going to happen when gasoline gets to $5? Where is it? And how low will the market go when it gets to $5?
First, I know we shouldn't be challenging the highs when something as important as gasoline keeps going higher. It is too big a tax. Way too big. The $100 billion break in prices for the consumer that comes from natural gas being so low -- a number arrived at by Mark Papa, the ceo of EOG (EOG) -- doesn't make up for that huge oil tax we pay at the pump. But until we see the whites of the consumers' eyes, nobody seems willing to sell on it.
Sure, the food companies are all talking about inflation and those that raise prices, in part because of rising oil prices, are the ones that seem to be losing a lot of business. But not a single retailer so far in this retail reporting season talked about gasoline and the sales were all pretty fantastic.
Again, in 2011 we would be saying "the retailers are being too rosy, let's short them." Again in 2011, we would be buying a huge number of SPX puts betting that sellers would emerge and swamp the market.
But it hasn't happened.
I know there are tons of rational people who would say "it hasn't happened YET!"
To which I come back and say, in 2011 it would have happened in spades, but 2012 seems like the year where people say "OK, that's true, gasoline is bad, but there is so much else that is good that we will ignore it until someone a some major company says 'we can't ignore it anymore.'"
Until then, I am reluctant to say sell, sell, sell, gasoline's going to $5 because:
- I don't know if it will, although if we don't get a resolution in Iran I think that it's likely.
- The consumer, unlike 2008, seems somewhat inured to the shock of high oil prices.
Yep, there's always something wrong. It just doesn't always impact prices or get reflected in the stock market the way you would expect it to be. So far, in 2012, the impact of anything that would be suicidal in 2011? Some bed rest and then back at 'em. Right now it looks like the pattern continues.
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