Little Talked About Cause of Recent Market Fall?

[Recyclersteve]

I heard a new theory today that I'd like to throw out to everyone for comment. Here goes... One big reason for the market collapse we've had recently is foreign countries with heavy exposure to oil that are hurting because of the lack of income they have due to such low oil prices.

So what do they do to pay the bills? They start selling billions of dollars in stocks they have in brokerage accounts all around the world.

Who could potentially do this? I have no clue how much each country has in their collective brokerage accounts, but here are names that come to mind... Venezuela, Russia, Saudi Arabia and perhaps even Canada.

This is just a theory I heard from one person. Does this sound plausible to anyone? Please share your comments on this if you can. Thanks.

[68Camaro]

That's not a new theory and I wouldn't say it's theory; it's fact that when oil-dependent revenues decline that those dependent on that revenue must either pump more, borrow more, sell assets, or reduce spending (which creates a related cascading effect). (Or for those few that can do this, print money.) That's basic economics. But it's way more than that though; the price of oil is both a definitive symptom of a stressed global economy as well as a stimulus to a decline.

The current bump back up into the lower 30s from 27-28 is a dead cat bounce - the short sellers are loving it because they can lock down profits and exit their positions. Long-term, the price has to continue to drop until someone cries uncle. The demand for it isn't there. Transportation use is down. Secondary use (plastics) is down. Pumping is up. Storage tanks and ships are topped off and full. The place to be (I suspect) in the short term is tank manufacturing - I haven't checked to see if this has happened but they must be going balls to the wall 24/7 to build new tanks - (and they won't be able to keep up).

The price will soon reverse again and fall, fall, fall. Until enough people stop pumping that the supply stabilizes, and at this point I think enough damage has been done that we're going to see oil prices depressed for a number of years, oil-related businesses continue to go bankrupt for years.

[Rodebaugh]

-Commodities in the toilet.
-Rising interest rates.
-China on the cusp of recession.
-US recovery is artificial

See you at DJIA = 9000

[beauanderos]

That's not a new theory and I wouldn't say it's theory; it's fact that when oil-dependent revenues decline that those dependent on that revenue must either pump more, borrow more, sell assets, or reduce spending (which creates a related cascading effect). (Or for those few that can do this, print money.) That's basic economics. But it's way more than that though; the price of oil is both a definitive symptom of a stressed global economy as well as a stimulus to a decline.

The current bump back up into the lower 30s from 27-28 is a dead cat bounce - the short sellers are loving it because they can lock down profits and exit their positions. Long-term, the price has to continue to drop until someone cries uncle. The demand for it isn't there. Transportation use is down. Secondary use (plastics) is down. Pumping is up. Storage tanks and ships are topped off and full. The place to be (I suspect) in the short term is tank manufacturing - I haven't checked to see if this has happened but they must be going balls to the wall 24/7 to build new tanks - (and they won't be able to keep up).

The price will soon reverse again and fall, fall, fall. Until enough people stop pumping that the supply stabilizes, and at this point I think enough damage has been done that we're going to see oil prices depressed for a number of years, oil-related businesses continue to go bankrupt for years.

Good answer

[agmoose]

I over heard a couple of fellas today talking about moving all in on oil, because "it's gotta shoot back up over $50 pretty quick, summer is right around the corner."

What is that saying about fools and their money?

[Recyclersteve]

I over heard a couple of fellas today talking about moving all in on oil, because "it's gotta shoot back up over $50 pretty quick, summer is right around the corner."

What is that saying about fools and their money?

Were those the same guys who went all in on silver when it found "solid support" at $40 an ounce in 2011?

[Recyclersteve]

Another piece of this that is getting virtually no attention pertains to the sharp sell off that began early this month. Since you had a brand new year you had countries operating under new calendar year budgets and that could have triggered some new selling. Just a speculative thought. I have no insider knowledge here whatsoever.