Crude Continues Retreat
Crude oil continues to fall. The run is now four days long. Worry about the EU economy and slowdowns in China and the United States has trumped the concern that Iran may try to block oil shipments through the Strait of Hormuz. More and more economists have said the low oil prices are not enough of a stimulant to reverse a slide in troubled economies. That is not necessarily true. No matter what models economists use, there is little precedent for oil prices matched against a rolling set of recessions that have moved from West to East. If unemployment rises and business production slows, the issue of what oil and gas cost will become academic to people and enterprises that suffer the most.
Investors Flock to Dividends
The increase in the stock prices of companies that have strong cash flow and high dividends almost certainly will continue as investors look for safe havens that pay investors an actual return. Treasuries may be safe, but they pay out nothing. Companies like Verizon (NYSE: VZ) and AT&T (NYSE: T) have ironclad balance sheets. Their sales or earnings could slow, but cash reserves and cash flow make it extremely unlikely they will have to cut dividends. So watch the prices of these stocks rise as demand increase. Other companies likely to be on this list are General Electric (NYSE: GE) and Coca-Cola (NYSE: KO).
Douglas A. McIntyre
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