With oil prices approaching $70/bbl, and gasoline prices ranging from $2.50-$3.50 a gallon, I have to ask, where is your pain threshold? Is it $3.50, $4.50, $5.00 ? Unless I am wrong, oil prices will not peak until Americans begin screaming bloody murder, and consumers begin demonstrating against high energy prices. I know you don't believe this will happen, after all, we are too civilized for this type of behavior. Oh, you think so ?
Unless I am very wrong, consumers are beginning to get irritated as we speak. But, not irritated enough to begin protesting. They are however irritated enough to bring the President's approval ratings down. Sure, Iraq has something to do with this, but oil prices are also a huge factor.
Soon, if not now, high energy prices are beginning to eat into consumers standards of living. Today, Wal-Mart (WMT), the world's largest retailer, came out with earnings that beat the street by .02 cents. The company's sales feel short of expectations, and then the company said that the third quarter could be tough. Why ?
The majority of Wal-Mart's sales come from working class people who basically live from paycheck to paycheck. Energy prices have a profound impact this group. As gasoline prices continue to rise, this group is less likely to continue spending on products that are not the absolute essentials like food and shelter. Today, Wal-Mart is down 3.3%, and a little over a point from its 52 week low.
Retailers such as Aeropostale (ARO), Gap Stores (GPS), American Eagle (AEOS), and Best Buy (BBY) have all seen a big pick up in insider selling. Is this a prediction of future events for the economy? I think so.
