Our bakken plays have continued to trade sideways as oil has settled towards $76 per barrel. We had a major blip on the recovery radar with the economic troubles in Dubai with some state owned entities not being able to make some upcoming debt payments and essentially asking for more time to do so. American banks don’t have that much exposure to this debt so the impact is not necessarily direct, but psychologically, this is a huge negative and raises questions about whether this is the tip of the iceberg. VIX, the volatility indicator jumped 25% after hitting a low near 20 approximately 2 weeks ago. In addition, the holiday shopping season got off to a lackluster start in my opinion with spending down from 2008. In addition, my personal observation in the malls this past weekend seemed to indicate that traffic was down as well as spending as compared to last year. I saw no black friday frenzy or big ticket item buying and have heard similar from colleagues, a number of which have plenty of discretionary income to spend. Obviously this just one statistically insignificant data point but I cannot imagine this bodes well for the retail sector. I think we are going to have negative volatility for the remainder of 2009 with our bakken plays trading sideways at best with the potential negative catalysts listed below
- China economic growth seen slowing. GM issued a release on this today.
- Retail sales for holiday season could be poor hurting stocks in retail sector and causing overall drag on the market
- Analysts indicating that large banks could potentially have to raise more capital to boost liquidity
- Jobless rate that continues to climb putting a drag on growth. A jobless recovery is an oxymoron and economic spending cannot be sustained.
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Tags: bakken economic crisis volatility