Once more unto the breach: analysts raising numbers on airlines, restaurants, theme parks, department stores, discounters, consumer packaged goods. Cutting numbers on oil drillers, oils.
It is that simple.
We always fight it initially, because the U.S. takes its cue from other countries that have nowhere near the sensitivity we do. We are the only country for which these prices come right down to the bottom line, and come down quickly.
Plus, we are the only country that spends excessively for the holidays. Now we will spend even more aggressively. Maybe we will buy not just the new Apple (AAPL) iPhone, but the iPhone accessories as well. Maybe we will pick up a new printer? Maybe we will splurge and buy the gloves, and not just the boots. That's what we do.
It's pretty clear that the Saudis did win, and that they are out to break the U.S.'s oil-and-gas trajectory. Sadly, for that great growth story, crude oil is priced at levels that sees marginal players go under and the independents scaling back.
If oil were priced even a few dollars higher, this country's drilling program would be maintained because of the low cost of our technology. Many of these new wells coming up in the Permian and the Eagle Ford are at about $40 per barrel, so there's still plenty of room, and the easy transport to the Gulf doesn't crimp profits. But if there is any guesswork about where the oil is in the ground and there's no easy transport -- meaning lots of trucks to trains -- those projects will not get done.
When oil was in the high $80s I had Harold Hamm from Continental Resources (CLR), one of our largest independent oil companies, on Mad Money. At the same time I had on Charif Souki, the man who build Cheniere Energy (LNG) into what will be the U.S.'s largest liquefied natural gas (LNG) exporter.
Hamm said oil was bottoming right there, and that he was going to bet that way. We later found out that meant he took off his hedges.
Souki said there would be no technical support until the $60s.
God call, Souki. I really don't know a soul who thought he would be right.
Now many of the independents are hedged through the middle of next year. You won't see numbers come down big for them. They will be falling knives, though. We know from Seadrill (SDRL) to expect the worst from that group. Any of the oils with damaged balance sheets -- Stocks Under $10 portfolio manager Dave Peltier has done good work on those -- are truly up in the air. Meaning they are coming down sharply.
I had thought that there was no way all of the bears could be right earlier this week when I said that oil could bottom, give or take $5, when it was at $73. Oil is now at the outer limits of the give-5% range right now. That's good for 87% of the market and bad for 13%. Remember, the 13% that has number cuts is the first impact. Then rationality sets in on the other 87% and, historically, at least, those stocks go higher.