TLM Huge Crosses After Close

The close: Oil to the rescue Wednesday, June 18, 2008

Canada's benchmark index eked out a gain on Wednesday afternoon after the price of crude oil lifted energy stocks toward the end of the day, but financials remained weak.

The S[amp]amp;P/TSX composite index closed at 15,073.13, up 4.3 points but flat in percentage terms. The energy sub-index, down with the price of oil throughout most of the day, bounced to a 0.9 per cent gain in the afternoon after oil prices rebounded to $136.33 (U.S.) a barrel, up $2.32. EnCana Corp. rose 2 per cent and Canadian Natural Resources Ltd. rose 2.6 per cent.

Financials, meanwhile, looked ugly from the get-go, when Morgan Stanley reported a steep drop in its second-quarter earnings, Fifth Third Bancorp sliced its dividend and a hedge fund manager warned of enormous losses and writedowns still to come. In Canada, Manulife Financial Corp. fell 1.5 per cent, making it the biggest single drag on the index, Royal Bank of Canada fell 1.3 per cent and Toronto-Dominion Bank fell 1.7 per cent.

In the United States, the rebound in oil prices did not help matters, of course. Plus, investors were gloomy after FedEx Corp. shocked the market with a fiscal fourth-quarter loss and lower guidance for the first quarter – a sign that high energy costs (surprise!) and lower economic activity (surprise!) are biting the bellwethers. FedEx shares fell 2.1 per cent.

The Dow Jones industrial average closed at 12,029.06, down 131.24 points, or 1 per cent - its second triple-digit loss in two days. The index dipped below the 12,000-mark – a psychological hurdle for investors and observers who like round numbers – for the first time since March, falling as low as 11,994 in afternoon trading.

The broader S[amp]amp;P 500 closed at 1337.81, down 13.12 points, or 1 per cent. Fifth Third Bancorp plunged 27.3 per cent and dragged down other regional banks. Regions Financial Corp., for example, fell 10.5 per cent.

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Oil No bubble trouble?

No bubble trouble?

Wednesday, June 18, 2008
How should investors interpret the latest findings from a UBS survey on attitudes toward oil prices?
The UBS survey of 1048 equity analysts and strategists concluded that most investors do not believe that oil prices are[amp]nbsp;a bubble about to pop: When asked “Are energy prices in a ‘bubble' similar to tech or real estate?”,[amp]nbsp;56 per cent of respondents answered ‘No' and 44 per cent answered ‘Yes', according to UBS.
“Our interpretation of results: it is no longer ‘contrarian' to expect prices to stay high,” said Thomas Doerflinger and David Bianco, strategists at UBS, in a note to clients.
Some people believe that you can't have a bubble when just about everyone believes there is a bubble – because that widespread skepticism would translate into rational prices. On the other hand, if few people believe there is a bubble, then prices have the means to keep rising. This is surely what drove the tech bubble in the late 1990s, when the "new era" view dominated those who said "this is nuts."
Contrarians might look at UBS's all-clear signal on the price of oil as a reason to be fearful that a bubble is indeed forming. Crude oil traded at $134.80 (U.S.) a barrel on Wednesday morning. So far this year, the price has risen just over 40 per cent.
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