March Madness, Stock Mania, And The Truth About Gas Prices

Includes: KBE, SPY, USO
by: Lou Basenese

Today we abandon long-winded analysis and let some carefully selected graphics do the talking for us.

Déjà Vu Anyone?

After a 10-day streak of consecutive gains, you might be tempted to think that the stock market has shot up too far, too fast. Think again.

At just over 50 trading days into the new year, the S&P 500 is up 9.29%. But at this point last year, the S&P 500 was actually up 11.76%. So the next time someone even tries to convince you that stocks have risen too far, too fast, I want you to whip out this chart.

Myth-Busting Runaway Gas Prices

Another common misperception is that gas prices have risen unreasonably fast. They're up about 16% since mid-December, so it's easy to understand why people would think that. But, as always, perception seldom matches reality.

Per Deutsche Bank's Carl Riccadonna, "Gas prices have a distinct seasonal pattern: Typically, they rise in the first half of the year, plateau during the peak summer driving season, and retrace most of the earlier gains in the back half of the year." And if we normalize gas prices to December 2012 levels, guess what? This year's price increases match up perfectly with the seasonal pattern.

So keep calm and carry on. There's nothing out of the ordinary (yet) going on with gas prices. Unfortunately, we can't say the same about some countries' banking systems...

Too Big to Bail Out?

As we all know, the latest financial crisis in the Eurozone comes courtesy of itty-bitty Cyprus. It boasts a population of just 800,000 Cypriots and a $17 billion economy. To put its size into perspective, consider that Apple (NASDAQ:AAPL) generates more than three times Cyprus' entire GDP in sales every quarter.

So how did Cyprus get in so much trouble?

Iceland knows. It found its way into the same pickle back in 2008. Specifically, its banking industry grew so big that it dwarfed the size of the entire country's economy. And it's a bit hard for a country to bail out its banks when that happens. In Cyrpus' case, its banking assets ballooned to 702% of GPD. Yikes! If you're curious about which other countries face similar circumstances, wonder no more:

The United States is noticeably absent from the top 10. But that's because of the infinite wisdom of our country's generally accepted accounting principles (GAAP). They don't take into account derivatives held by U.S. banks, which reach into the trillions. If they did, we'd sadly make the list. But we'll save that frightening little fact for discussion at a later date.

Bracketology 2013

In honor of all the lost productivity about to hit corporate America thanks to the biggest unregulated gambling event in the world, I figured I'd drop some depressing statistical knowledge on you, too. While you might have visions of completing a perfect NCAA bracket and walking away with fistfuls of your co-workers' cash, the chances of that happening are, well, less than good.

In fact, they're 1-in-9.2 quintillion. If they didn't teach you how to count that high in public school, don't worry. They didn't teach me in private school, either.

As you can see, you'd be better off spending your entry fee to bet a co-worker that you'll get struck by lightning in the next few weeks. Or that the U.S. economy is going to enter into a recession in 2013. That is, if you have any interest in actually stacking the odds in your favor.