Monday, January 10, 2011

Oil pushing higher again

Just when it seemed like gasoline prices had stabilized in NNY at the $3.30/gallon level comes news that supplies may be constrained further in the coming weeks after a shutdown of the Trans-Alaska pipeline due to a leak at a pump station.

Since 12% of the US crude production passes through this pipeline we could see a material uptick in prices if the shutdown persists. At this point, it sounds like it is a relatively easy fix, but there will be numerous hurdles that must be cleared before the pipeline re-opens. Oil is pushing $90/barrel again it wouldn't take much from a technical stand point to approach $100/barrel.

At some point, a sustained period of $3.30+/gallon for gas is going to be a concern for the US economy.

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Thechartstore.com put out the best chart I've seen yet summarizing why this "recovery" feels so different. If you look at the 11 recessions since World War II and create a composite of job growth after the recession you get the blue line in the chart below. Contrast that with the red line representing the 2007 recession.


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Alcoa always gets a fair amount of coverage given it's role as the first company in the Dow to report earnings. They also lifted spirits locally when they announced plans to re-open a local aluminum plant.
Earnings were a little ahead of expectations but revenues were light and higher input costs impacted results.
The stock is off about 2% after hours but that could reverse by the am.
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The market continues to be very resilient in the face of bad news. Global markets were very weak overnight again (continuing a trend that we've seen lately) and the US market opened lower and slowly gained ground all day.
There seems to be a steady rotation out of bonds going on right now and that money has to go somewhere and stocks seem to be the place right now. Europe seems to be getting ready to bailout Portugal which means another country that "doesn't need money" will suddenly take the bailout. Spain will be on deck next week.
Cheers!

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