NEW YORK (Real Money) -- Here's the issue in a nutshell: It would make every bit as much sense to have the S&P 500 futures go higher when oil goes down rather than lower, as it seems to now play out every day. It is so difficult to get our arms around something that's so bullish and so positive for the U.S. economy that is regarded as so bearish and so negative for all U.S. stocks.
Think about it -- You have to be out of your mind to think that it's terrible that we are all going to pay less at the pump or for our heating bills for those who still use oil or for industrials that need oil to make things and send them all over the world.
You have to be beyond stupid to wonder how something that puts so much money into peoples' pockets could take so many stocks down with it when it occurs. It's like when I talked to Klaus Kleinfeld, the CEO of Alcoa (AA - Get Report) this morning and he had to remind me how positive it is for world growth and asked how could that possibly be bad.
As oil goes down, it's the equivalent of some sort of incredible stimulus package where the U.S. sends you a check for thousands of dollars and it goes right into your wallet. Think about this kind of stimulus vs. the convoluted special interest stimulus package of $787 billion that President Obama signed into law Feb. 17, 2009, almost coincident with the bottom of the Great Recession bear market.
Investors loved that package of goodies for infrastructure, education, health care and renewable energy even as the so-called "shovel ready" infrastructure projects weren't shovel ready at all, the education checks went largely to union workers, the health care money can't really be seen at all and the renewable energy stimulus was totally misdirected. Plus, it was all done with borrowed money that ultimately led to tax increases for the upper middle class and the rich.
I question if there could be a less stimulating act than the American Recovery and Reinvestment Act of 2009. Now we have a total wealth transference, chiefly from OPEC nations to the developed world, of which we are the biggest beneficiary. Their pain -- which we frankly could care less about and means nothing to us -- is our gain. It is a natural question why our futures aren't soaring given the widespread positives that come from an incredibly broad and direct stimulus without borrowed money now and taxes later.
Perhaps, the most quizzical element of the futures being down rather than up is that the vast majority of the S&P 500 companies will indeed have their numbers raised. The companies that will fail can restructure their debt, lower their costs and drill some more. The holders of high-yield paper get hurt. The holders of anything else should do better. Even better, we are seeing a wholesale decline in all the raw costs that we use to make things, therefore driving manufacturing profits higher.
It doesn't matter, though. The sophisticated hedge funds know only how there will be pain before the gain. That overstretched countries that blow up and companies that go under drive markets lower regardless of what's "in" the actual markets.
So we deal with the lunacy of the linkage with the S&P and we wait until stocks are so low that they aren't affected by oil. Only then will this madness end and sanity will come back into play.