*****As you know, we are watching oil prices as a measure of economic health. Today, it’s reported that March existing home sales fell by a bigger than expected 3%. And new claims for unemployment benefits rose a bit more than expected.
Consequently, oil prices remain below $50 a barrel.
Conoco-Phillips (NYSE:COP) reported an 80% drop in year-over-year profits for the first quarter. The stock is up because the company still managed to beat earnings expectations.
One interesting note from COP: it’s capital expenditure budget has been cut 37%. That means the company is investing less to bring more supply on line. In the current environment, investing in oil supply is not as rewarding as it was a year ago when oil was trading at north of $100 a barrel. But with global CAPEX spending by oil companies down approximately 17% this year, this is an industry-wide trend that has dire consequences going forward.
*****The International Energy Agency (IEA) reports that as much as 2 million barrels a day of expected new oil supply production isn’t being completed due to current weak demand for oil, and similarly low price.
So the question is obvious: what happens when the global economy returns to health and demand for oil gets back on track?
It seems pretty clear to me that new supply simply won’t be there, and we risk an oil "super-spike" scenario much like the one that took oil prices to record highs last summer.
That’s why we’ve been recommending small oil-exploration companies in SmallCapInvestor PRO. One of our recommended stocks, OilSands Quest (NYSE:BQI), is already up 37%. That’s because, even though oil prices remain weak, investors realize that it’s temporary and they are already getting positioned for a rise in oil prices and exploration stocks.
We’re also excited about potential profits from two other oil stocks we’ve covered. Click here for a complimentary trial of my SmallCapInvestor PRO service and get the latest issue of the newsletter that includes my top oil stock picks.
*****My resident technical analyst, Jason Cimpl, is watching Apple (Nasdaq:AAPL) after it reported earnings last night. Here’s what he told TradeMaster Daily Stock Alerts readers in his morning missive today:
"Apple crushed earnings estimates in the first quarter of 2009, but did not deliver promising guidance. CNBC will tell you that AAPL is always conservative with the guidance and that shareholders should not worry.
To me, the miss on the guidance is a huge red flag. A high premium is already built into shares. Current shareholders should not care about the past, and instead should focus on future quarters. There is no way I would go near shares of AAPL right now. It is more likely to fall today than rise further."
*****I’m trying to avoid more commentary on the Public-Private Investment Program because it really gets me worked up (as if you hadn’t noticed). It’s not that I don’t think the plan could work. My question is "why?" Why is the Obama Administration so concerned about playing nice with the banks that made really stupid and reckless decisions that played a key role in sending the global economy into a tailspin?
Take the latest news on the plan. The FDIC is planning a test sale of $1 billion in toxic assets sometime in the next two months. And some of the remaining $100 billion in TARP funds will be used.
Why do we have to wait two months for this flawed program to start "testing?" If the administration had the will, these assets could already be off banks’ balance sheets and the banks themselves in stronger hands.
And does anybody else notice that the plan – namely to leverage TARP money with loans – is eerily similar to the leveraging that took place to buy these assets in the first place?
That’s it for today, I’ll talk to you tomorrow.