zman’s Energy Brain

oil, gas, stocks, etc…

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Look, the first analyst domino to fall:

Posted by zmann on October 3, 2006

Merrill Lynch downgraded the energy sector to underweight, saying near-term negative cyclical trends are outweighing the longer-term positive secular trends. “Cyclical negativity has set the stage for the sector to underperform, given the combination of fundamental headwinds and the sector’s strong outperformance the past four year, thereby forcing investors to look for growth and momentum elsewhere,” said Merrill’s U.S. sector strategist Brian Belski. Among fundamental headwinds, Belski said earnings growth has turned negative, margins appear to have peaked and pricing power has evaporated. On a macro basis, Belski said increased commodity price volatility, inventory levels that are running above U.S. demand and slowing global economic growth is weighing on the sector.

Gee, I wonder what tipped him off?! Like I’ve been saying, he’s the first out the door and now the doorway won’t be wide enough! It’s “mark to market” time gents and for the first time in a very long time, its time to take those numbers down- a sliding commodity price environment hurts doesn’t it?!. Don’t be the last guy around with over zealous price targets, price decks, and eps and cfps estimates!

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