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Lower oil price not good

Remember sub-prime mortgages?

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Karl agrees with us

Are lower gas prices at the pump a bad thing?

Of course not.

But here's what is bad:

At least 20% of all high yield bonds (junk bonds) are invested in the oil fields and that paper is based on an assumption of oil at or well above $80 a barrel.

Remember pre-2008, how residential real estate was the engine driving the otherwise weak US economy? That according to the idiots at CNBC and other deep thinkers pre crash.

What has been keeping the US economy numbers up since then? Success in the oil patch of course, specifically the dubious miracle of fracking (which we reported a year ago was a financial disaster waiting to happen.)

Are we the only analysts to see the obvious connection between the role a goosed and fraudulent real estate market played in keeping the market up pre 2008 and a QE inflated bubble in the price of oil (and related industries)?

If oil doesn't get off the canvas and soon, a lot of "fracking bonds" are going to go the way of AAA sub-prime paper with similar results.

Worse really, because the financial system's underpinnings are even shakier now than they were in 2008.

- Ken McCarthy