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Bloomberg has a shocking story on Roubini’s prediction for US losses: Roubini Predicts U.S. Losses May Reach $3.6 Trillion

U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

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“If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration.

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Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion. Citigroup Inc. posted an $8.29 billion fourth-quarter loss.

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Oil prices will trade between $30 and $40 a barrel all year, Roubini predicted. I see commodities falling overall another 15-20 percent,” Roubini said.

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As seen in the USO chart, oil prices have been in a free fall. Every little rally is getting sold into. Lets see if it stays in the trading range as predicted by Roubini.

Banks have been in a absolute free fall and rightly so look effectively insolvent.

Roubini has been right on many many occasions and i have no reason to believe he is wrong this time too.

United States Oil Fund, LP (USO) is a commodity pool that issues limited partnership interests or units that may be purchased and sold on the American Stock Exchange (the AMEX). The Company invests in futures contracts for light, sweet crude oil and other types of crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the New York Mercantile Exchange (NYMEX), International Currency Exchange (ICE) Futures or other United States and foreign exchanges (collectively, Oil Futures Contracts).

Oil is trading around 109$/bbl and recently breached its 200 day moving average on the downside. Oil has corrected multiple times on its way up but has never dropped below the magically 200 dma. Does this mean end of rally for oil ?? It will be an interesting few days to watch the movement. Lower oil means green days for the market.

Lower oil means happy days for airline stocks…..

Additionally oil refiners love to see lower oil prices.

Lower oil price means depressing profits for oil exploration companies…..

Similarly solar stocks becomes less valuable as an alternative source of energy when oil becomes cheaper…

Bloomberg has latest story about falling crude oil prices and stronger dollar: Crude Oil Falls on Minimal U.S. Storm Damage, Stronger Dollar

Crude oil fell for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a strengthening dollar curbed the appeal of commodities as an inflation hedge.

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The dollar’s gain is also prompting funds to lower their exposure to commodities, and another concern is demand as U.S. refiners are due to shut for maintenance soon.

Crude oil for October delivery fell as much as $1.20 to $108.51 a barrel. Prices are up 48 percent from a year ago. Yesterday, futures lost $5.75, or 5 percent, to settle at $109.71 a barrel, the lowest close since April 8. Oil, down more than $37 from its July record, dropped because Gustav inflicted less damage to states along the Gulf than occurred in 2005 when Hurricanes Katrina and Rita struck.

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Royal Dutch Shell Plc, Total SA, ConocoPhillips and Valero Energy Corp. are among oil and gas producers, and refiners that have started initial inspections of facilities.

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Oil’s 26 percent slide from its July 11 record of $147.27 a barrel is a symptom of an economic slowdown in the U.S. and Europe and may continue over the next six months, investor Marc Faber said yesterday in a Bloomberg Television interview.

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New York crude oil yesterday breached the 200-day average as slowing economic growth and unprecedented fuel costs slash U.S. demand for oil products.

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Oil prices are unlikely to drop below $100 a barrel because OPEC will cut production to support the price, billionaire hedge-fund manager Boone Pickens told CNBC yesterday.

Lower oil prices means up days for the stock market. Transport and retail sectors are benefiting from the drop in oil prices. Airline stocks have been bouncing higher for this reason. JBLU, LCC, NWA have such a surge in their stock prices. How long will the that last ? Its a guessing game.