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Politics : Welcome to Slider's Dugout
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To: SliderOnTheBlack who wrote (6826)10/31/2007 11:03:29 PM
From: jim_p  Read Replies (1) of 50249
 
Good post Slider!!

So, how do we make money with these markets?

Oil prices are now back up to where they were in 1980 on an inflation adjusted basis which back then resulted in one of our worst recessions due to higher inflation and higher interest rates that resulted from the high cost of energy.

Today were back to 1980 peak oil prices and the markets keep going higher, interest rates are going down and "core" inflation is declining (so we're told).

The big difference between 1980 and today is back then higher oil prices brought on new production which resulted in the price of oil collapsing down to $5.00 by 1986.

Today the price of oil keeps going higher and the supply of oil is still declining.

A very simple fact is the world cannot continue to expand at any rate of growth without abundant energy supplies, and so far higher prices have not resulted in higher supplies.

So at what point will higher oil prices result in higher inflation, higher interest rates and zero/negative growth? If history has any value we should be getting pretty close to that point in time.

The only explanation I can come up with regarding the stock market's recent behavior is the world is awash with UDS's and with the USD declining, foreign countries holding USD have decided that they are losing money holding on to US treasuries, so they are looking for ways to improve their returns by buying multinational common stocks that will benefit from the declining USD. Lots and lots of excess capital available to pump up the markets from places like China, Russia and the Middle Eastern oil countries and our markets are cheap compared to theirs right now.

Jim
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