Oil, Oil, Oil at ???
Everybody is worrying about oil and wondering how high it is going to go. As far as the stock market is concern, I think the market itself is just consolidating after a big run. News like oil price is just a reason for the bears. I don’t know when the oil prices will impact the economy, but I expect oil to stay around $60 to $70. At this level, the market will do just fine. Again, I want to reiterate that we use any pull back to add more positions.
It's not when you buy. It's when you sell!
I disagree with you that current oil prices will not have an effect on the market that that equities will be “just fine”. Even if that is the case, however, there is no way oil will peak at $70. That’s just the magic number now that we’ve busted the $65 mark. Once we break $70, we’ll start talking about $75. And then $80, all the way through $100. Tell me how the SOX won’t drag the market down after a disastrous earnings season next quarter. Oil isn’t everything, but it can’t just be sloughed off as “just another commodity”. Ignoring it is foolish.
Chris,
Thanks for your comment. Let me list some of the reason why I think current oil prices won’t impact current economy.
1. Adjusted for inflation, the oil prices would have to reach $93 in order to be comparable to the prices in the 70s.
2. The oil price has contributed to some inflation pressure, but according to Sysco (food company) CEO the consumers have continued to dine out at the restaurants it distribute to and absorb the price increases. Sysco have also increased its efficiency in distribution to contain cost. If you look at the retailers like Lowes and Best Buy they are continuing to be doing well.
3. Most of the other economy have been have been living with high prices at the pump for the longest time and they are still prospering especially the Asian countries like Taiwan, Japan, and Korea.
4. The increases in the real estate wealth have contributed the continuing spending by the consumers.
5. Oil as part of the US economy is much smaller now than it was in the 70s.
The reason why I feel the oil price will probably fluctuate between $60 to $70 is because I feel the latest surge in prices is not contributed by demand, but by trading speculation. The current problem is at the refinery side where I can see why the gasoline prices go up, but not crude. As for the long term outlook on oil, I agree it will probably continue to go up, but I also think the current high prices are enticing the oil companies to start actively looking for oil, which may lead to more supply.