The bulls are back in the fast lane. I'm getting my horns out of the closet! It is nice to be back with my bullish friends that I abandoned for most of this year. Of course it took some of the most dramatic global economic stimulus the world has ever known to win me back and it is not even the expectation of demand that has sold me. It is Fed Chairman Ben Bernanke and that magical printing press of his. He has taken extra ordinary action to lift oil out. The Fed is using a massive air pump to re-inflate the deflated energy complex. That does not mean that energies will go straight up! We should see a big drop before we pop, yet the Fed for all intents and purposes has printed a bottom for the complex.
Bloomberg news reports that, “The Obama administration will announce details of a plan today to expand the $700 billion rescue of the financial system that will rely on enticing private investors to buy the troubled assets clogging banks’ balance sheets. Treasury Secretary Timothy Geithner will unveil the Public Private Investment Program today, has crafted an approach using up to $100 billion of bailout money to spur investment funds to purchase -- and banks to unload -- the illiquid securities and loans that have caused credit to dry up. The Treasury, Federal Reserve and the Federal Deposit Insurance Corp. will all play a role alongside private investors in aiming to buy between $500 billion and $1 trillion of troubled assets.
Now I wonder if these private investors make a lot of money off of this deal will Congress go back and retroactively tax them? There might be a precedent for it. And the taxpayers did have a massive burden. If the speaker Nancy Pelosi thinks they made too much she could vote to tax them at 95%.
The dollar may be key for the trend change in energy. The energy complex turnaround has not been triggered by demand but by central bank action. With the Fed printing money can the dollar regain its momentum versus other currencies? ECB Central Bank President Jean-Claude Trichet told the Wall Street Journal that, “It’s pretty possible that we would continue to be non-conventional through the channel of bank financing. This channel remains for us essential.” In other words they should continue to print money too.
There are more signs that the recent state of lower energy prices may start a wave of energy company maneuvering and merges. The Wall Street Journal reports that Suncor Energy, the world’s second-largest oil-sands producer, is close to buying Petro-Canada, the nation’s second-largest refiner, for about $15 billion in stock, uniting two of Canada's biggest oil companies at a time of tepid world demand for crude. The Journal says that the price of $15 billion represents a roughly 30% premium for Petro-Canada. The all-stock deal would allow the companies to merge while conserving cash, a sign of the pressure some oil producers face amid the plunge in crude prices since last summer. The Canadian government, which could veto the deal, has signaled its support. Stock players should look for other possible merger candidates. Low energy prices have firms ripe for the picking right now.
Phil Flynn is vice president of Alaron Trading and a Fox Business Network contributor. He can be reached at (800) 935-6487 or pflynn@alaron.com .
