The headlines were pretty stark: "Trump Strike Kills a Top Iranian," the Wall Street Journal blares; U.S. Strike in Iraq Kills Commander of Iranian Force," shouts the New York Times.
So the market reacts swiftly. Back from vacation and up and at 'em early, I see the futures down 47 ticks at 4:30 a.m. Gonna be a rough day.
Sure enough it was at the opening as anchors struggled to make sense of who Major General Soleimani was and what the heck he was doing stirring up the pot in the always fragile Iraq? Was he behind the protests against the people who did liberate the country from a terrible dictator, Saddam Hussein? Was he the troublemaker trying to create a replay of the Iranian embassy hostage taking as occurred under President Carter, something that pretty much wrecked his presidency?
One after another I heard guests talk about the $70 to $80 oil ahead when the mighty Iran retaliates. The press spoke about Iran as if it is more powerful than the U.S. I am getting used to that; China's more powerful, too.
And what happened?
Oil blipped up a bit. But as my friend Rusty Braziel of RBN.com told me, don't look now but the forward curve, the most important indicator of where oil is going, barely budged. Up 43 cents out five years.
Why?
The U.S.
The moment oil goes up, sellers of the futures come out of the woodwork to raise capital to demonstrate conservatism in order to woo investors. Those sellers are U.S. oil companies that have more oil than they know what to do with and need some ready cash to be sure they can keep drilling with less and less money. Many don't have enough in the till. Others are simply trying to live within their means.
The world has changed since the time when the Mideast controls the oil price. The marginal producer is the U.S. It needs higher oil to stay in the game and it uses it as a honey pot until it's gone.
That blunts the impact.
Does it mean we should use the weakness to start buying everything?
I say that we are coming into a more complex period and it behooves us to have some cash when the big players come back next week and see that the market's not down enough if there is more trouble in Iraq.
It's hard to figure out what Iran's next move is but one thing is for certain, I didn't hear a soul say that the assassination had to take place to actually allow Iraq to rule Iraq and not Iran to do so, although I would argue that a fragile Iraq is the Iranian devil's playground.
I think that analysts, anxious to demonstrate big wins, might be your enemy here.
Sure, we got a couple of price target bumps for Apple (AAPL) one year after the anniversary of its vicious preannouncement. We caught an important upgrade of Humana (HUM) from Goldman; two cautionary notes about next week's Walgreen's (WBA) report.
But these are small time. Watch for analysts and strategists to turn into armageddonists forgetting that China's the real issue, not oil and that killing a general who might have masterminded an embassy takeover is something a Ronald Reagan may have done if he could.
If you must buy oils, here's the list: BP (BP) for yield, a safe 6.3%, Schlumberger (SLB) for a return to worldwide drilling, something that is happening, particularly by governments, with what looks to be a steady 5% yield, and Pioneer (PXD) for speculation that oil zooms or that you get a takeover.
Otherwise, move on.
(Apple, BP, and Schlumberger are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
