Breadth is still at 31%. Oil is barely down, which is like up for oil. Silver, gold and solar are higher, the holy trinity of every investor’s portfolio. Copper is also higher; I’m a fan of FCX.
One sector that is raising one of my eyebrows, if not both, are the truckers.
What the heck is going on there? I suppose truckers are lazy sloth like creatures anyway. But we still need food and goods delivered, no? Or, will Amazon send it all via drone?
On a PE basis, the truckers haven’t been this cheap since 2006, trading at 15x. The price to sales ratio is 0.85, a 65% discount to the overall market, again not seen since 2007. Come to think of it, that might not be a good thing, as the market imploded to hell in 2008. One thing is for certain, this isn’t your grandfather’s market, unless grandpa traded the 1929 crash.
Be mindful of the systemic risk that is currently present in the high yield space and how each downtick in your favorite oil stock lends to further deterioration in the credit outlook.
By my calculations, oil needs to rally 20% from current levels in order to quell the fears of high yield. If we get a face ripping rally in oil, many distressed, high debt/eq names will barrel higher by 50%, just like last year. If you recall, the oil and gas space caught fire last year and we all made a small fortune early going. If oil is to rally, it will rally between the month’s of January through March, leading up to the driving season.
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Anecdotal, but…my neighbor is part owner in a small long-haul trucking company. He has been home a lot lately. I asked him how business was going, he says, “There is a lot of freight out there but nobody wants to pay to haul it.” Translation: overcapacity.
My brother works for a trucking firm in Minnesota. They are doing well, but then they mostly deliver beer to New Mexico, which makes sense, and a lot of cheese to Wisconsin – which to me sounds a lot like selling ice to Eskimos.
I have a second cousin that ships dildo’s, S&M gear and anal plugs throughout the south. Business is brisk.