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Stock Gains Not Durable and Oil is to Blame - Money Matters for 10/27/05 Don Bravo | 10/27/05
Some days, like today, you have to be thinking to yourself, "If I could see that coming, why couldn't they?"
This kind of thought is related to the release of the durable goods report that sent waves of fear through all sectors of the economy today and sent traders scrambling to sell anything and everything that even remotely resembled a product that could be sold to an American consumer or business. The report, which covered durable goods (defined as goods whose intended lifespan is three years or more) orders for September, was released prior to the opening of the markets and was worse than the so-called experts predicted.
The report showed a slowing of such orders on the scale of -2.1% and the reason it seemed to be such a no-brainer to many that it would be bad, should have been firmly ingrained in the mind of anybody who drove a vehicle during the month of September.
With the price of a gallon of gasoline stripping disposable income out of the hands of just about every American, it shouldn't have come as a big surprise that fewer people were out buying appliances, computers and other high-ticket type items.
Of course, your intrepid traders on Wall Street, surely among the most myopic species on the planet, were completely blind-sided and had stoked the markets earlier in the week. One has to wonder just how much purely bad news it will take to send the indices into a swan dive or when the traders themselves declare that they've seen enough and simply decide to sit on the sidelines until the storm of derision subsides.
Today may have been a very good indication of what lies ahead. While ExxonMobil (XOM) reported that their third quarter profits were the largest ever recorded (a massive $9.8 billion on revenues of over $100 billion) and the stock loses ground, the die is cast. There's a growing feeling out in the great heartland that is seeping into offices and boardrooms, that the oil companies do not operate in a free market environment, but rather deceive and cajole and fix prices of necessities like oil, natural gas and gasoline.
The idea that during the panicked environment after the landfall of Hurricane Katrina, these companies - five of them which control 80% of all gasoline bought or sold in the USA - ExxonMobil, British Petroleum, ConocoPhillips, ChevronTexaco and Amerada Hess (and to a lesser degree Royal Dutch Shell) now constitute a domestic cartel and conspired to fix prices higher when supplies were never threatened, has now come to the forefront.
If there really were shortages which prompted the need for higher prices at the pumps, where are the reports of station closures and long lines, and what are the long-term effects?
The truth is that there was no shortage and that the major oil producers and retailers took advantage of and frightened their customers, and conspired to fix prices higher, using a natural disaster as a scapegoat and over cover for their evil doings.
The trade on ExxonMobil today signifies that there is going to be some blowback and that the fraud and gouging after Katrina will not go unchecked or unpunished. There are already investigations in Congress, but they have no teeth. More information, especially in the face of these recent profit reports, has to come forward and either the federal government has to take action or private citizens will continue to grumble, complain and eventually take matters into their own hands as the next phase of the scam - higher costs for heating this winter - begins to appear.
If the oil companies believe it is in their best interests to obtain the highest possible prices for their goods, at the highest possible profit level, at the risk of destroying the underlying economy, the laws of supply and demand are going to contain some very rude consequences for them, and today's durable goods report is just the first hint that something is amiss.
Because people will be spending their incomes on heating oil, natural gas and gas for their cars rather than on food, clothing, dining out, and all the other niceties that used to be part and parcel of the relatively good life and prosperity we once enjoyed in America, the oil companies are going to be facing pressure not only from average citizens but business and government interests as well.
The American oil cartel has set the stage for a battle of far-reaching proportions which will effect every aspect of the lives of every man, woman and child in the country.
BY THE NUMBERS
Dow Jones: -115.03; 10,229.95 close
NYSE Advancers: 872
Nasdaq Advancers: 702
NYSE New Highs: 40
Nasdaq New Highs: 42
Gold: +2.60; 475.60 close
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