2009 Facts for USA
Energy sector contributes about 7.7% of GDP of USA, i.e. about USD1.0 trillion (create about 9 million jobs).
2014 Facts by Gary Shilling
Energy sector, average debts over market value is about 1.2 times. For weaker energy companies, the gearing is 4times its market value.
Many billions of junk bonds (USD200b) were issued from the energy sector over past few years, and banks is also exposed to leveraged oil and gas sector about USD300b.
Effect on drop of crude oil to USA economy
The financial risks from the dropping of crude oil price far outweigh the benefits to its consumers. Although energy sector is capital intensive, its contribution to employment is also significant to USA.
If Worldwide going into recession
Stocks (USA) will be dragged along. The environment will switch from RISK ON to RISK OFF. Investor will dump STOCKS and run for safety in US Treasurys AND dollar.
UPDATED 25 December 2014
Debt margin directly related to NYSE, have grown from USD150 billion in 2009 to USD450 billion by end of 2013. The debt margin was around USD300 billion prior to the crash in 2009.
Similarly hedge funds doubled from USD1.4trillion to about USD2.7 trillion in the same period. Demand and supply of oil or other commodities aside, a lot of QE liquidity AND carry trade have went into the "financial markets"
The growth of GDP say about USD250b to USD350b over the last few years, have anyone ask how much debt was created over the same period AND how much of the GDP is contributed by the Stimilus from the Government. "GDP is just figures used in deceit to get support from the people who doesn't think too much and use the figures religiously to guide their biz direction"
My View (on equities, energy and end game)
Oil will continue to drop to as low as USD30 per barrel. US of A will panic later in first half of 2015, realising the financial risk from the drop of crude oil price outweigh the gain for the consumers. (too much hot money in commodities over last many years)
Stocks in USA will go into a tailspin. And world will goes into recession. It is not a prediction, it is just a GUESS based on the current event. (Equities will be the last to fall after JUNK bonds)
WHAT IF I AM A MALAYSIAN?
SCARE DIE ME
Put some into USA dollar or USA Treasurys (10 or 30 years).
Accumulate DEFENSIVE STOCKS in Malaysia slowly i.e. 20% 30% 50% in 2015, 2016, 2017.
DEFENSIVE STOCKS is recession free, high dividend (>4%), double digit growth in revenue and earnings, low PE (below industry average PE for last 5 years)
Created by sosfinance | Jul 14, 2018
i think you already sold all of your stocks no wonder u are too negative on their future growth
2014-12-24 20:35
Choop818, don't need to be sorry, everyone is entitle to their opinion. Different people read the market differently. That is why we have buyers and sellers.
johnny cash, on contrary, I added more this year, but mainly on Vitrox, Wellcall, Gadang, Digi, Padini, AAX, Silk, OCK, Pestariang, and thinking to add more next year, gradually (of course, using only my EPF money)
It is not important if I am positive or negative. It is just how I read the US market and try to take advantage of it (if I can). For me, look for value stocks in Bursa. Even good value stocks get bashed recently, but, in a longer run, they will be back. Always have a plan, and extra bullets market drop drastically.
US hits new high of 18,000 before christmas and can even touch 19,000, but the risk is getting higher and higher, just like Bursa, the blue chips are toppish compared with its neighbours. The growth over the last few years mainly comes from some financial engineering stunts, cutting costs, lower interest, share buybacks (lack of new expansion program?)
Over the last few years since 2008, hedge funds has grown from USD1.4 trillion to USD2.7 trillion in 2013. During the peak in 2007, hedge funds was at USD1.8 trillion. Most QEs liquidity from USA, Europe, China, Japan went into commodities, government bonds, junk bonds and stocks. Sales growth was slow, although earnings growth was faster because of cut cost impact, and share buybacks.
Anyway, stocks follows optimism and pessimism. When it reaches the peak of optimism, it will turn, when it reaches the peak of pessimism, it will TURN. RISK ON RISK OFF. Now is RISK ON. So, be wise with your money.
2014-12-25 00:06
johnny cash, I have to admit that I'm pessimistic of the future. Short term gains is not worth the risk. I don't have the time and inclination to be glued to the computer screen for hours on end. Not now, later maybe, when the time is ripe. To me, at the moment, the least risky investment is as suggested by sosfinance, is in USD.
2014-12-25 07:33
choop818
Sorry, don't quite agree that US shares will tank. I believe it will move up from 20k to 40k region, depending on how severe the worldwide financial crisis is. Funds will park their money in USD because it is the world's reserve currency and part of it will filter to the share market.
2014-12-24 11:03