No upside to commodity deflation. That's pretty much what we are all feeling these days. When we read that zinc, iron, copper, aluminum and steel are hitting multi-year lows and we see that the Baltic Freight Index is unfathomably low at about 500, we only know how to say "woe is me." It's as if no one benefits and everyone loses from these metals being cheaper.
Same thing goes for oil as we now know. In fact I can think of only eight stocks that people believe benefit from oil these days: Delta (DAL), Spirit (SAVE), United (UAL), Southwest (LUV) and American (AAL), Royal Caribbean (RCL), Norwegian Cruise Lines (NCLH) and Carnival (CCL). Everyone else seems to be a casualty in some form or another.
It's worse: the commodities that everyone needs lower, the food complex, aren't really going down anything like these others. The Fed doesn't take into account commodity deflation when it discusses lift-off. So you don't get any benefit.
In the meantime, if you look at the debt of some of these energy companies, like SandRidge (SD) or Chesapeake (CHK), you know that there's more pain ahead. Debt doesn't trade this badly if it doesn't need restructuring.
Yep, it's all bad. Amazing, because some companies in this country have to be significant beneficiaries.
Yet, it's as if the only places that commodities are used are in China. Now, in truth there are tremendous benefits, particularly to consumers who feast on lower gasoline and heating bills. But even there, we have made cars so anti-guzzling that the pennies aren't adding up the way we theorize.
Instead, when we are on conference calls involving nationwide retailers, we spend a tremendous time talking about how poorly Texas is doing -- which, by the way, isn't all that bad.