Don’t cheer plunging oil prices for 2015

Posted: November 27, 2014 in Uncategorized

The oil price is now in a technical downtrend to $50 a barrel. A bonus for the consumer, but a real danger for the economy.

Why?

First of all the SP500 is composed by 30% of energy stock that would suffer from such low prices as the average cost for the new shale gas is $45-50.

OPEC countries and exporters country (like Australia) will suffer as often their budget projections are set on oil levels around at least US$75 – $85.

Even more interesting a lot of these companies financed themselves via the high yield (junk) bond market, which is already under stress (but out of the media attention).

The only year where we had low oil price and high US Dollar (that again put pressure on US companies)  was the long forgotten 1986/87 where the US markets fell over 7%

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