Click chart to enlargeThe charts of SPWR and STP continue to look anemic. These aren't stocks we own, but we've been watching them as a sign of how much speculation has returned to the market. The solar stocks seem to attract all of the gamblers, so watching these stocks gives you insight into how frothy (overvalued) the market's bubble can get. It's our theory that any Dow action above the 200dma is a bubble as long as gas prices are at $4 a gallon. You can have a healthy stock market OR high gas prices, but not both. The bubble hasn't officially started yet, as the Dow has never closed above its 200dma.
At this point, gas prices alone are enough to keep the economy lagging for the next several quarters. Here's the quick math:
A household earns $75,000 a year. $15,000 goes to Federal income taxes, $5,000 goes to state income taxes, $8,000 goes to local real estate taxes, $24,000 goes towards the mortgage, $2,000 goes towards car insurance, $1,000 goes towards homeowner's insurance, $10,000 goes towards food, and $5,000 goes towards home heating oil, electricity, phone, and tv. That leaves the average American household with $5,000 of spending money each year. That's roughly $100 a week. 100% of that is going to Exxon Mobil now, so our model family is not taking a vacation this year, not dining out, not buying new clothes, etc. If our model family has to pay for health insurance, their yearly spending figure becomes a cool negative $7,000. That all adds up to a lagging economy, which in turn results in a lagging stock market. That's our take on it, anyway.
14 comments:
UK pays $11/gallon and their economy finds way to survive. The truth is, the gas price will continue to go higher. However, this doesn't mean the stock market will never recover. We just find new ways of thinking to readjust like the European market.
It isn't the American way to adjust the budget to compensate. We'll just put the excess onto a credit card and lose our houses in the process.
Is today the day for CHNR?
The Europeans probably thought the same thing when their gas prices shot up. You would have to agree that the gas price isn't coming down anything soon or ever. Hence, sooner or later, we'd have to adjust in a way that makes sense for long term (alternative E, smaller car, move to the city, public transportation, government mandate, etc). Stock cannot be held down forever just because of the gas price will be high from now on.
No one is more dependant on their cars than the Americans, when the housing market was hot, alot of people were forced to commute further to find afforable housing, now that decision is coming back to bite them. Also, public transportation systems are better developed in Europe.
Yeah, snot I am in CHNR. Lets watch.
--clarke
8,000 to real estate taxes? I don't think the average family who makes 75K a year lives in a house over 750K. My 200K house costs me $1800 a year in real estate taxes... but your core point is valid
Don't forget to figure the brilliant "stimulus checks" into your equation...that 1200 bucks is really going to tip the scales!!
I drove accross america last summer from east to west and the gas was so cheap compared to what i pay in Canada (or Ireland for that matter) that i filling the car with the Premium stuff. America has the cheapest gas of anywhere i have ever been so the current high cost is only a matter of comparing it to what your used to. European prices are triple the prices you pay in the states and even canada is 30% higher so trust me when i say that the economy is not going to collapse on the back of higher petrol prices. Ford and GM might collape as people start to buy more efficent toyota's though. Do you know how rare a 3 litre car is in Europe? Most people drive 1.6 to 2.0 litre cars and anything bigger is considered very unusual. 3 litre+ cars are considered near unsalable due to the cost of petrol and insurance. It amazes me in the US how people frequently dont know how big thier engine is. That WILL change if prices stay up.
You contradict yourself, conor. You say the US economy wont collapse if our gas prices rise to euro price levels. Then you talk about how rare 3 litre engines are in europe. Well, 3 liter engines are quite common in the US. And there is not the money to switch over to smaller engines, because of the negative savings rate.
Wow. CLF misses earnings by a lousy .04 cents and gets hammered down $12 to 156 in pre-market, and now it's up $11 @ 178! Crazy.
I wanted to buy in pre-market but figured someone must know something else besides poor earnings if it was being pushed down so radically.
"Don't overthink it meat!!!!!!" (Lifted from one of the best sports movies of all time)
Craig
PS- Snot, do you ever buy or sell during pre-market?
snot, what you think of SIRI, getting some attention today.
-fleacountry
All solars going UP.
Cup and handle confirm.
Even if the SIRI merger goes through, it doesn't create a wildly profitable company. At least not for several years. And how will they deal with Howard's upcoming retirement? He's by far their biggest draw.
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