While I don’t agree with everything in this article from today’s Wall Street Journal, it is worth reading:
“Energy company earnings have collapsed. In the U.S., earnings of the energy sector of the S&P 500 have fallen by 76%. The same is happening in energy around the world. And over the past quarter, earnings for companies in all sectors have started to slump, too. Every recession in a generation has been preceded by such an earnings rollover.
The public finances of oil-producing nations—corrupt kleptocracies-cum-welfare-states, from Russia to Venezuela to Saudi Arabia—are also collapsing. When petrodollars dry up at the source, they dry up downstream as well, across the whole global economy.”
My take is that because of the concentration of oil wealth in a few hands, the downside is well reported… The benefits to the middle class and poor who are still recovering from 2008/9 are spread out over the world… It’s a huge transfer of wealth where the bad news is up front and the good news is developing… The benefits of lower energy costs will take time to work through the world economies… There is also the issue of the flow of funds… Sovereign wealth funds are likely net sellers of stocks and bonds worldwide, causing or adding to market volatility… One more thing, my heating oil bill (I live in the NY) is about half of what it was last year… I’m making a lot of seasonally adjusted money (it’s still an expense!)…
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