Anyone can toss out five dramatic events that might change the world.
The point of investing, however, is weighing your risks. It is better to know five things that will happen and bet heavily than to bet lightly on a long shot.
Here are five things that will most likely happen in the fourth quarter.
1. Christmas Shopping Will Peak Early
The news out today is that Macy’s will hire 85,000 positions. Though this sounds impressive, it is the same as last year. Most of these will be part time.
Research firm ShopperTrak says Christmas sales are projected to increase 2.4% between Thanksgiving and Christmas.
ShopperTrak data further says that sales will peak in November due to the early arrival of Hanukkah. This year, the Jewish holiday begins on Sunday, December 6 — 10 days earlier than in 2014 — and lasts through December 14.
Additionally, the National Retail Federation’s Holiday Consumer Spending Survey found that the average holiday shopper had completed 52.9% of their shopping on or before December 10, 2014. This figure is up from 49.9% in 2013 and further demonstrates the shift toward earlier shopping.
If you are buying retail, your plan should be to buy now and sell on December 6th.
2. China Will Not Collapse
We’ve been getting a lot of talk about the end of China. Global sentiment is extremely bearish. This appears to be overdone.
According to the third-quarter China Beige Book, published by CBB International and modeled on the survey compiled by the Federal Reserve on the U.S. economy, capital expenditure rebounded slightly in the second quarter, and the services sector showed strength.
A Bloomberg survey predicted a 6.64% GDP growth for the year, which is below the 7% officially forecast by the government but still bigger than anything the U.S. has produced since the boom years of the late 1990s.
Though manufacturing and exports are down, there are positives. Job growth inched up, company profits improved, and wage growth moderated. Capital expenditure picked up for a second quarter after four quarters of broad decline.
3. Oil Prices Will Trend Up
Deutsche Bank is predicting that oil prices will rebound slightly in the fourth quarter to $53. Goldman Sachs says oil will remain around $50 for the next 15 years.
Putting out a 15-year prediction on oil makes as much sense as predicting who will be the Super Bowl winner in 2030. It just can’t be taken seriously.
That said, the EIA has confirmed that U.S. oil production is declining, already down 500,000 barrels per day since peaking earlier this spring at 9.6 million barrels per day. At the same time, demand is rising.
The chart would suggest that a consolidation between $40 and $53 for the fourth quarter is the most likely scenario.
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4. U.S. Oil Export Bill is a Moot Point
There was an old Saturday Night Live skit with Rev. Jesse Jackson in which he was on a talk show and all he said was, “Your argument is moot.”
A bill that the House will vote on later this month will allow the United States to export crude oil for the first time since 1975. This is a net positive because history has shown that free trade benefits more people than tariffs and restrictions. Furthermore, the type of oil we can refine is different from the type of oil we produce.
That said, exports will have minimal impact in the fourth quarter for the simple reason that the price spread between Brent (world oil price) and the price paid at Cushing, Oklahoma is $1.80. There will be no massive oil price arbitration over the next three months.
5. Lithium Will Continue to Boom
If you are looking for an energy play, look no further than lithium. Lithium is used in hybrid, plug-in hybrid, and electric vehicles. Every carmaker on the planet is rolling out the next generation of these products.
Lithium prices have jumped 15% recently due to looming shortages from current producers. Tesla’s Gigafactory alone will consume 15,000 tons of lithium carbonate a year.
The sector is expected to quadruple to $6 billion over the next four years. In Q4 2015, average investors will start to become aware of the pending lithium boom.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
