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Kevin brings a wealth of derivatives experience to RCM Asset Management. Following graduation (Marquette University – Evans Scholar 1999) Kevin started working for LETCO Trading on the CBOE floor. Between 2000 and 2007 Kevin traded a variety of Equity and Index options products as a market maker... More
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  • Gasoline V. Groceries 0 comments
    Feb 14, 2013 2:43 PM | about stocks: UGA

    April Gasoline futures are up 15% in ONE MONTH (from 290 to 330)
    April Gasoline futures are up 20% since November (election) lows.
    April Gasoline futures are up 32% from last June lows.

    The general rule of thumb is for every 1 cent move in retail gasoline, between $1 billion and $1.2 billion is syphoned from discretionary spending in the US.

    Payroll taxes went up at the beginning of the year, which already put a squeeze on consumers ability to buy new iPads and organic produce.

    Retailers and casual dining establishments don't like rising gasoline prices.

    Apparently some have already started cutting back on the Whole Foods purchases (Stock down almost 10% today on earnings miss).

    You can safely assume that about American consumers will have about $50 billion less in discretionary spending ability because of payroll tax holiday expiration and pain at the pump.

    In Europe - things (prices) are considerably worse.

    But don't worry, Bernanke and Co are pumping $85 billion onto the Primary Dealers (big banks) balance sheets every month. (The Japanese and British are doing likewise).

    Plus the RUT is up 6% in the past month and 26% off last June's lows so one hand washes the other right? Chart overlaying April Gas and the RUT futures attached.

    (click to enlarge)RBJ13

    Highly reminiscent of 2011 (minus the Arab Spring). Can you have it both ways?

    (click to enlarge)WFM

    (click to enlarge)

    RUT futures v RBOB

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.

    Stocks: UGA
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