Saturday, December 22, 2018

Stocks and oil crash plus a driving update for Pearl

Three economic events happened yesterday that all connect, however weakly, to each other.  That also give me a chance to reassess where the economy is heading, including validating a prediction I made.

First, Business Insider reported the Dow capped off worst week since the financial crisis with 414-point plunge.
Stocks tumbled Friday, with the major averages all closing firmly in negative territory. The Dow fell 414 points, or 2%, bringing its weekly decline to 6.87%.

The S&P 500 also shed 2% on Friday, while the Nasdaq Composite fell 3% — entering a bear market, or down 20% from its highs — as some big tech names posted steep declines.
Business Insider did not quote the closing value of the Dow Jones Industrials Indes, but CNBC showed it in This sell-off has undone most of the Trump rally, says Riverfront's Kevin Nicholson.

Kevin Nicholson of Riverfront Investment Group and Mark Luschini of Janney Montgomery Scott discuss the benefits of investing in cash as it outperforms all other asset classes this year.
The Dow closed at 22,445.37.
 That's at the top of the range I predicted it would fall to in The tax bill and the U.S. economy in 2018 and beyond
I expect the Dow Jones Industrials to get above 25,000, struggle to break 26,000, then sink down to between 20,000 and 22,500 over the next couple of years.
I already counted coup on two of those predictions in John Oliver helps update 'The tax bill and the U.S. economy in 2018 and beyond,' a top post of the seventh year of Crazy Eddie's Motie News when I responded to Paul W.'s Hope You Invested In Manure Futures....
The Dow broke 25,000 early in January, had no trouble getting above 26,000 but then struggled to stay there, and fell about halfway from 26,000 to 22,500, so my predictions look pretty good so far.  At worst, I'm one and one-half out of three and that score will stand no matter what else happens.  As for the future, watch what happens with interest rates.  Janet Yellen's successor and the rest of the Federal Reserve Board may not raise rates as aggressively as they would have before the worst one-day point drop in the Dow.  That may allow stocks to recover to 25,000 before falling below 24,000.
That additional prediction happened, too.  Now I can collect on the Dow falling to between 20,000 and 22,500 by the end of 2020 a year early.  I am now two-and-one-half out of three, three-and-a-half out of four if my response to Paul W. is included, on my predictions about the stock market, which is the final tally.  I'm not going to withdraw that score if the Dow falls below 20,000, which it is likely to do.  Watch Hedge fund veteran says the bear market has arrived, here's where you want to hide out for an expert opinion on CNBC.

Mark Yusko, Morgan Creek Capital, discusses his take on markets and the volatility hitting stocks.
He expects a stock market sell-off like 2000-2002, while I wrote "I expect the next recession to be somewhere between the 2001 recession or the 1990-1991 recession in its effects, probably closer to 2001."  I'm glad to see that someone who knows more than I do support my assessment, even if he doesn't know that he is.

Moving on to the second event, CNBC reported yesterday US crude ends the week down 11% at $45.59 for worst performance since January 2016.
Oil prices extended this week's sell-off on Friday, posting the worst weekly performance in nearly three years, as global oversupply kept buyers away from the market ahead of the long festive break.

U.S. West Texas Intermediate crude oil ended Friday's session down 29 cents at $45.59, the lowest closing price since January 2016. WTI earlier fell to $45.13, its lowest intraday price since mid-July 2017.

Brent crude was down 40 cents at $53.95 per barrel by 2:30 p.m. ET, bouncing from the session's 15½-month low at $52.79. Brent was on pace for a decline of more than 10 percent for the week.
As CNN noted, oil is in a bear market, having fallen 40% off its highs earlier this year.  That means its time to update Thanksgiving travel up as gas prices falling but still high.  Follow over the jump.

Lower oil prices mean lower gas prices.  Added to the seasonal decline, that is like adding weight to an already sinking ship.  WWMT confirmed this trend in Gas prices at two-year low for the holiday season.
Santa came early this year for millions of drivers hitting the road, with gas prices hitting a two-year low for the holiday season.

Prices could possibly drop lower in the coming days after the cost of oil and wholesale gasoline fell Thursday, according to AAA.
Lower gas prices mean more travel, which WWMT also reported.
AAA is forecasting that about 3.3 million Michiganders will take a road trip between now and New Year's Day, with an additional 140,000 drivers expected on the roads, compared to last year, excluding out-of-state drivers.
More people are expected to travel over the holidays nationwide.  Watch RUSH BLOCK: Holiday travel will set records, AAA says from KHOU 11 in Houston, Texas, for that news.

More than 112 million Americans -- or one-third of country -- will travel over the holidays and most of them are choosing to drive.
I plan on being one of those 112 million, but I'll save that for another post.

Speaking of me traveling, the final item is that Pearl turned over 44,000 miles yesterday, making it 59 days since  she passed 43,000 miles on October 23, 2018, so it's time for a driving update.  I drove her an average of 15.95 miles per day, translating to 516.95 miles per standard month and 6186.4 miles per year.  That's less than the 18.18 miles per day, 554.55 miles per month, and 6636.36 miles per year I drove Pearl from August 29, 2018 to October 23, 2018.  It's also less than I drove during some of the comparable period last year, which was an average of exactly 20 miles per day and 610 miles per month from September 26, 2017 to November 15, 2017, when Pearl passed 37,000 miles.  That means it's time to calculated the actual miles driven over the past year.  From November 15, 2017 to December 21, 2018 is 403 days, so Pearl traveled an average of 17.37 miles per day, 529.78 miles per standard month, and 6,340.0 (actually 6349.95) miles per year.  Since my goal has been 6,500 miles per year, I'm pleased that I'm driving less.  At least I have some good news.

By the way, don't expect oil prices to stay low.  CNBC uploaded Crude prices will rebound sharply mid-2019, Canary CEO predicts yesterday.

Dan Eberhart, CEO of oilfield services provider Canary, joins 'Squawk Box' to discuss the 25 percent drop in crude oil year to date.
After inversion of the yield curve, a strong rebound in crude oil would be another herald of recession.  As I wrote last year, "The second is a rapid rise in oil prices, which has occurred either slightly in advance or concurrently with every recession since 1973."  Enjoy the good times while they last, as I still expect a recession to begin by a year from now.

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