STOCK MARKET WATCH -- Wednesday, 4 August 2015

[Demeter]

24. The Oil Crash Has Caused a $1.3 Trillion Wipeout

http://www.bloomberg.com/news/articles/2015-08-04/the-oil-crash-has-caused-a-1-3-trillion-wipeout



It’s the oil crash few saw coming, and few have been spared as it erased $1.3 trillion, the equivalent of Mexico’s annual GDP, in little more than a year.

Take billionaire Carl Icahn. When crude was at its peak in June 2014, the activist investor’s stake in Chesapeake Energy Corp. was worth almost $2 billion. Today, oil has lost more than half its value, Chesapeake is the worst performer in the Standard & Poor’s 500 Index and Icahn has a paper loss of $1.3 billion. The S&P 500, by contrast, is up 6.9 percent in that time.



State pension funds and insurance companies have also been hard hit. Investment advisers, who manage the mutual funds and exchange-traded products that are staples of many retirement plans, had $1.8 trillion tied to energy stocks in June 2014, according to data compiled by Bloomberg.

“The hit has been huge,” said Chris Beck, chief investment officer for small- and mid-capitalization companies for Delaware Investments, an asset management firm in Philadelphia with $180 billion in assets under management. “Everybody was thinking that oil would stay in the $90 to $100 a barrel range.”

The California Public Employees Retirement System, a $303 billion fund that provides benefits to 1.72 million people, owned a $91.8 million slice of Pioneer Natural Resources Co. in June 2014. At the time, Pioneer was a $33 billion company and one of the biggest shale producers in Texas. Today, Pioneer is worth $19 billion and Calpers’ stake has lost about $40 million in market value.

Since June 2014, the combined market capitalization of 157 energy companies listed in the MSCI World Energy Sector Index or the Bloomberg Intelligence North America Independent Explorers & Producers Index has lost about $1.3 trillion.

If crude rebounds, investors may make some of their money back, though values may not recover as quickly as they fell. After the tech bubble burst in 2000, erasing $7 trillion from the Nasdaq Composite Index, it took almost 15 years for the market to return to its pre-crash level.

Oil, which lost more than half its value in the past year, will rise less than $20 through the first quarter of 2016, according to the median estimate compiled by Bloomberg.