Monday, December 15, 2014
The Last Time Oil Crashed
I posted this article in Market Talk and got some great feedback on the article. We are all enjoying cheaper fuel at the pump right now as that frees up money for other purchases. When gasoline drops in half in a short period, that event is going to affect a lot of other things, too. It could also be a sign of some very bad things to happen.
"There has only been one other time in history when the price of oil has crashed by more than 40 dollars in less than 6 months. The last time this happened was during the second half of 2008, and the beginning of that oil price crash preceded the great financial collapse that happened later that year by several months.
Well, now it is happening again, but this time the stakes are even higher. When the price of oil falls dramatically, that is a sign that economic activity is slowing down. It can also have a tremendously destabilizing affect on financial markets. As you will read about below, energy companies now account for approximately 20 percent of the junk bond market.
And a junk bond implosion is usually a signal that a major stock market crash is on the way. So if you are looking for a “canary in the coal mine”, keep your eye on the performance of energy junk bonds. If they begin to collapse, that is a sign that all hell is about to break loose on Wall Street."
E-85 is $1.79 in Blanchester. That's about as low as its ever been. My picture shows what it was not too long ago!
The discussion on market talk is very interesting. I have a lot of farmer friends who post there I trust. They all have some interesting points.
The point is we are all enjoying this reprieve in fuel prices. What are the consequences? In our tightly connected world market, when one thing goes down, so do other things. Those things may impact our income and even our retirement.
It all looks scary to me.