Oil is key to all we do, to every facet of our economy. Or to put it more precisely, energy is key, and for now, because of a long-term failure spanning administrations of both parties to develop alternative energies, energy means oil. Our need for oil, our growing appetite for this critical resource, is the prism through which it is essential to view all that is happening in the world today and all that will occur tomorrow. This is true for all of us, citizens in general. And it is true in an even more specific way for investors who want to understand what is likely to happen in the financial markets in coming years and what they need to do to protect themselves and profit.
Above all, it's essential for investors to grasp, intellectually and viscerally, the following realities:
• For the last thirty years, the price of oil has been the single most important determinant of the economy and the stock market. Sharp rises in oil prices have been deadly for the economy and the stock market, while steady or declining prices, or even prices that increase only gradually, have led to good times. For investors, it's what we dub your "desert island, one phone call" indicator. If you can know only one thing about the world, make it the direction of oil prices over the preceding year, and you'll do better in the stock market than almost anyone else following any other indicator, from interest rates to corporate profits. This has been true for the last three decades, and it will remain true throughout the early part of this century-until we kick our oil habit and develop and switch to viable energy alternatives.
From S. Leeb The oil factor. Great reading..JMHO
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WASHINGTON (Reuters) - Finance chiefs from the world's wealthiest nations warned that higher oil prices and growing imbalances have increased risks to the global economy but said the outlook for further expansion was good.
money.cnn.com
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