“The mistake we make is trying to call the absolute bottom.”
Tony Dwyer, of Cannacord Genuity Investment bank uttered those words in his report released on February 3rd, where he revealed their projections were way off for a positive outlook to 2016 saying “our baseline assumptions were too high and wrong”.
The market’s hopes of rallying skittish investors, who fear they’ll lose even more in the wild ride of stocks, doesn’t seem to be working. Even with a temporary upswing, the production freeze of the oil industry has many investors buckling down for the worst and getting out of the market.
“The bottoming process is frightening and takes time.” says Dwyer.
Many brokers are pointing to a weakening in the industrial economy, which is hitting commodities like oil especially hard.
“The recent sharp drop in equity prices, weakness in the industrial economy, and slowing economic data have many expecting a recession. China is making policy mistakes, the Fed has begun raising short-term interest rates, emerging economies are being forced to defend/devalue their currencies, the commodity price decline has caused Industrial Production to turn negative, and corporate credit spreads have been widening.”
Even so-called “Blue chip” stocks like Exxon Mobil and Chevron have lost more than $95 billion of their market value since last year. Chevron had a 90% earnings drop from 2014 to 2015.
Banks Are Preparing for Massive Loan Implosion
Wells Fargo currently has more than $17 billion dollars on their books in oil loans but they only have $1.2 billion set aside if the loans implode. This trickles down to Main street receiving far fewer loans when they need it due to the risky bank activity. More than 42 North American oil companies have filed for bankruptcy since the oil crash and the outlook is bleak. Tens of thousands of jobs have been lost around the country and the foreclosure rate in oil-rich states is skyrocketing.
There are even whispers beginning to circulate of a bail out for the oil and gas industry.
Greg Valliere, Horizon Investments’ chief strategist said, “If Washington can bail out big banks and the auto industry, why not a bailout for oil companies?”
The shaky stock performance in the first part of 2016 has many investors wondering where they can go to protect their assets and get out before another 2008 recession hits them hard.
The answer may be here: