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Have you been following the current earnings season? We are witnessing horrible earnings while stocks keep going up and up. All the losses in August 2015/Februa

by tma-1 10y ago

Have you been following the current earnings season? We are witnessing horrible earnings while stocks keep going up and up. All the losses in August 2015/February 2016 have virtually disappeared after the oil price recovery.

dev1n 10y ago
oil is a leading indicator of demand. The fact that it picked up is a sign that demand picked up. stocks are continuing to rise because investors see the current drop in earnings as a blip, not as a market catastrophe.
- dismal2 10y ago
  no, oil has been spiking up due to incessant rumors of production cuts. even though the latest talk about a production cut was a no go, oil spiked a bit earlier this week due to kuwaiti oil worker strike.
- VLM 10y ago
  In the old days broad economic demand moved faster than production declines. So production being vaguely constant the price told you a lot about main street employment. In the modern era of frac wells where depletion rates are like 50% in 2 years, broad economic demand is now much slower than production declines. That's the problem with secondary recovery... The "balance sheet" looks good in that you'll profit (unless prices tank) but the cashflow is terrifying you don't dig a well and collect for 30 years like the old days, you do exotic processes and get high production rates for like two years, then production drops to zilch. On a large, century size scale it screws up Hubbert graphs. You can ramp up for a century, but extensive secondary production means the decline slope will be just a couple years instead of a nice symmetric century or whatever. By analogy its like switching farm land from an olive orchard to corn production and being surprised at fundamental shifts in the financial sheets. (Yo its just another plant, right, well theres a bit more to it...)
Zigurd 10y ago
You also have a large increase in corporate debt, some of which, maybe a lot, has gone into stock buybacks. It's a way of translating ZIRP into stock price while nothing was created.

by tma-1 10y ago

dev1n 10y ago

oil is a leading indicator of demand. The fact that it picked up is a sign that demand picked up. stocks are continuing to rise because investors see the current drop in earnings as a blip, not as a market catastrophe.

dismal2 10y ago
no, oil has been spiking up due to incessant rumors of production cuts. even though the latest talk about a production cut was a no go, oil spiked a bit earlier this week due to kuwaiti oil worker strike.
VLM 10y ago
In the old days broad economic demand moved faster than production declines. So production being vaguely constant the price told you a lot about main street employment. In the modern era of frac wells where depletion rates are like 50% in 2 years, broad economic demand is now much slower than production declines. That's the problem with secondary recovery... The "balance sheet" looks good in that you'll profit (unless prices tank) but the cashflow is terrifying you don't dig a well and collect for 30 years like the old days, you do exotic processes and get high production rates for like two years, then production drops to zilch. On a large, century size scale it screws up Hubbert graphs. You can ramp up for a century, but extensive secondary production means the decline slope will be just a couple years instead of a nice symmetric century or whatever. By analogy its like switching farm land from an olive orchard to corn production and being surprised at fundamental shifts in the financial sheets. (Yo its just another plant, right, well theres a bit more to it...)

Zigurd 10y ago

You also have a large increase in corporate debt, some of which, maybe a lot, has gone into stock buybacks. It's a way of translating ZIRP into stock price while nothing was created.