Juggling Dynamite

As Dr Copper ‘gave’ $2.60 a pound this afternoon–another day down more than 4% (-38% from its 2011 ‘stimulus’ rebound)–mean reversion that was, no doubt, slowed by future’s trading, hoarding and rigging, is finally underway. Commodities, of nearly every stripe, are re-coupling with the downturn in global growth.

This big picture chart of the Commodities Index (CRB) since 1990 offers some perspective on what large price declines in the world’s staples historically have signaled about the global economy and risk markets.  Ignoring such signals has never been a wise strategy for growth and stock bulls in the past.

And just like that, Canada’s growth engine implodes:   Alberta likely to enter recession this year.

Recession even at $65 a barrel?  Try current $45, or secular support in the under $30/barrel range…So goes oil and Alberta, so goes Canadian growth hopes and the federal budget, see:  Low oil prices to tip feds from surplus to budget deficit

Surprise, surprise…right when 100% of the sell side analysts were predicting record profit levels in 2015:

“Forecasts for first-quarter profits in the Standard & Poor’s 500 Index have fallen by 6.4 percentage points from three months ago, the biggest decrease since 2009, according to more than 6,000 analyst estimates compiled by Bloomberg. Reductions spread across nine of 10 industry groups and energy companies saw the biggest cut.

Earnings pessimism is growing just as the best three-year rally since the technology boom pushed equity valuations to the highest level since 2010. At the same time, volatility has surged in the American stock market as oil’s 55 percent drop since June to below $49 a barrel raises speculation that companies will cancel investment and credit markets and banks will suffer from debt defaults…

Profit is forecast to have grown 2 percent in the final three months of 2014 and increase 2.8 percent for the current quarter, down from analysts’ October estimates of 8.1 percent and 9.2 percent, respectively. Without energy companies, profit gains would have been 4.7 percent and 7.8 percent, the most recent projections show.

Except for utilities, every other industry has seen reductions in estimates.” See: Oil whacks S&P 500 earnings growth