Nothing like a good old-fashioned retail, restaurant and travel rally based on higher oil prices!
Yes, it is that ridiculous. But think about it. The leader in the Dow? Home Depot (HD). Here's a stock that went down on anemic housing starts but is soaring on gasoline going higher. Soaring on the consumer having potentially less in her pocket.
Oh my, for the first day in ages, Best Buy (BBY) is up. What's Best Buy stand for? How about the ultimate in discretionary spend? True non-beneficiary of oil going higher. No matter. So this is what makes Macy's (M) and Kohl's (KSS) roar. Wal-Mart's (WMT) rallying 3% even as it's raising wages bigger than people thought. Did you ever think more shirts and ties will be sold when oil goes higher? You have a better reason why PVH (PVH) could be up almost 5%?
When was the last time Marriott (MAR) went higher? How about when oil last went higher? Yep. And boy do we like Delta (DAL) today even as its biggest variable cost is none other than jet fuel! Holy cow, even Spirit (SAVE) has spirit -- up almost 6%!
Now the whole rally isn't chimerical. What you see is a combination of oil jumping 6% andKinder Morgan (KMI) not blowing up. Kinder Morgan was the sum of all our fears, a gigantic company that slashed its dividend big time, causing a world of hurt for people who owned it for the big distribution and paid huge taxes when the master limited partnership was turned into a C-corp. Ouch: Most people paid huge capital gains and then were almost instantly saddled with capital losses.
But this quarter was a good one. In fact, business was real good, much better than everyone thought, and the shorts who figured it must really be bad have to run for cover, especially because we now know Kinder's management overly slashed the dividend out of caution that proved unwarranted. Sure, there was talk about counterparty risk -- but it was from two coal companies that went into reorganization.
No matter, the averages have masked the real damage that has been wrought upon the rich who reached for yield with these stocks that often billed themselves as toll roads but didn't talk enough about what happens when not enough oil and gas is pumped through those "roads." I will say this: If you like natural gas, you are heartened to see real growth in use for natural gas. Then again, it is the fuel of the future.
Remember, this market's concerned about both the debt and the equity of oil and oil-related companies, and if oil can lift its head for a couple of days -- despite still burgeoning inventories -- then some of the most stretched companies can do equity deals and get more liquid, or at least sell forward some oil to take in some cash.
Oil is a commodity, so all the commodities and their related entities run, too. Alcoa (AA) jumps 6% back to some ridiculously low dollar amount, $7. But at least it can go up. The sun also rises. Don't forget Dow (DOW). Yes, I am surprised that PPG (PPG) got hit, but I think they are very different animals, although of course they are chemical companies.
And, how about the banks! Look at Wells (WFC) go, because it has oil loans. I guess it is just a matter of time before people realize Bank of America (BAC) got hit on oil loans and now they can do better, too! (Dow Chemical, Wells Fargo and Bank of America are part of my charitable trust portfolio.)
Yep, it's about as nutty as you can get out there.