Bald Eagle,
I really do admire Joe Battataglia. I think he's one of the brightest analysts out there. He has been THE most consistent bull, and he has been correct long term. He's been a bull so long I think he has a lot mentally (not to mention financially) invested in it's survival. It's as though it's his baby he's nurtured along the way. The one thing that threatens the bull story is inflation (or last year's deflation worries). The first sign of this inflation may be oil.
His theory is that the economy can be strong with low unemployment and can have earnings growth without inflation, due to increased productivity, etc. I agree with him in general, especially when the slower world economies act as a damper on inflation. If oil goes up because of a decrease in supply (OPEC cuts), then his analysis can still hold up, because it's an artificial, singular inflation, not representative of commodities in general. If demand is a significant component in rising oil prices, then that's more ominous, since this would translate to most commodities, labor, etc. and would most likely lead to inflation, assuming the Fed didn't snuff it out (which it probably would do in short order.) This last scenario would lead to a market correction because of either inflation or interest rate increases, at least for the short term.
Anyway, I doubt the long term bulls like Joe will jump on the oil band wagon until they're divested of some of their stock holdings first. When Joe says the Bull Market is over, watch out. We'll be down a good 500 points that day I'll bet.
I think oil can go up on a supply basis, and then gradually moderate as demand picks up with the Asian recovery, since OPEC can eventually increase supply to maintain stable prices. It's in OPEC's interest to maximize the world's economy. So in the end their goals are not far apart from the Fed's, in a strange way. That is why I think the U.S. does have some complicity in OPEC's decisions, as George Cole postulated earlier.
The price of oil may spike high, however, before OPEC decides to open the spigot, due to a convergence of tight supply/depletion and accelerating Asian, European, and Latin American growth, as well as OPEC's 'burnt once' perspective. I see this as a likely scenario, making the OSX the best investment out there, from a risk-reward perspective (what other perspective is there <g> ?)
Richard |
