Tommaso:there is a correlation between oil prices and market movements.
Current Naz resurgence is due to perceived forthcoming falling of oil prices.
However folks must be forgetting that any drop in oil prices
only increases the likelihood that Alan G. will keep raising and raising and
raising rates until this economy either slows down or stops
(gg, " recession, v. " soft landing " ).
AAbelson put it best in his editorial last week:
" Petro Plot "
TA
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Petro Plot
By Alan Abelson
interactive.wsj.com
Crude conspiracy.
That's what's behind the spectacular rise in oil prices. And
that's why we poor suckers are paying over $2 for a gallon
of heating oil and soon will be paying that much for
gasoline.
Oh, we know it sounds like another of those nutty notions
cooked up by weirdos wearing beanie caps crowned by
little whirling propellers. But trust us, it's the truth!
The wonder is, it's so darned obvious, how in the world
has it escaped exposure?
Who are the conspirators? We won't beat around the bush
-- especially since George W. happens to be one of them.
The others: Alan Greenspan and the born-again cartel
known as OPEC.
Far-fetched? Perhaps. Logical? You bet.
Consider the evidence, circumstantial to be sure, but no
less compelling for being so.
Let's start with who stands to benefit most from the great
spurt in oil prices in a little over a year from $10 a barrel
to $31-$32. The answer -- and not necessarily in order of
benefiting: OPEC, Alan Greenspan and George W. Bush.
Who stands to lose from the astonishing surge in the petro
price? Why, airlines, truckers, kindred energy gobblers,
anyone with a home to heat, a car to drive and Al Gore.
That OPEC is sitting in the catbird seat -- or, more aptly,
the buzzard roost -- is so apparent that we won't waste
your time or our breath by elaborating. Suffice it to say the
sheiks are smiling, have every reason to and will do
whatever it takes to keep their spirits and prices high.
Alan Greenspan has chosen to join the plot to drive up
crude prices because it's an ideal way to avoid the painful
necessity of biting the bullet, i.e, biting the bubble. Tom
Petrie, who called the turn on oil in this sacred space back
in the early months of '99 just before the commodity's
explosive rise, reckons that $30 a barrel translates into a
$70 billion drag on the U.S. economy (and $200 billion
worldwide); interest rates, Tom figures, would have to rise
to 7 3/4%-8% to exert a comparable braking impact.
For Mr. Greenspan, any alternative to boosting rates to that
formidable level in an election year is preferable, even
becoming a clandestine schemer to kite the oil market, in
league with George W. and the big dudes from OPEC. And
man, you have to sympathize with Mr. G., squatting for
hours on end with his co-conspirators in a stifling tent in
the middle of the desert, cloaked in monk's garb, drinking
tepid tea and nibbling on decade-old dates.
For his part, George W., remember, is an old oil hand with
good buddies in the cartel. In any case, the gang's movers
and sheikers owe his dad for saving their skins (and their
billions) back in '91.
Mr. Bush anticipates, rightly, that Americans are going to
be screaming mad at forking over $2 a gallon every time
they fill up the old jalopy. But -- and here's the key to his
involvement in the great petro plot -- he shrewdly
calculates that they're apt to aim their ire at the powers that
be, namely, Mr. Clinton and his Veep, and vent their
displeasure at the polls next November.
So there you have it, fueling the upward sprint in oil prices
is a grand conspiracy concocted out of a witches' brew of
OPEC's greed, Mr. Greenspan's fear and Mr. Bush's
ambition. Now that it's laid bare, we can only conjecture
as to Al Gore's response. But it might be wise to keep a
sharp eye out for any indications of his emissaries huddling
with Saddam Hussein.
As Friday's dynamite market response to the downbeat
February employment report makes dramatically clear, Mr.
Greenspan is going to need all the help he can get from
mounting oil prices and anywhere else, if he really means
to rein in the wealth effect.
Payrolls swelled by a meager 43,000, compared with
consensus expectations of 205,000 (when it comes to
economists' estimates, that's considered within standard
statistical error). We should note that the only guess we
saw that turned out to be even remotely worthwhile was by
our old colleague and current untamed newsletter
proprietor, John Liscio, who on Thursday pegged the likely
increase at 85,000.
Besides the surprisingly feeble number of new hires, what
heartened (perhaps we ought to find a more felicitous verb)
investors was that the unemployment rate ticked up for the
first time since May of last year.
The final session's blazing rally had all the makings of one
of those anxiety-release explosions, triggered by a piece of
news awaited with dread but that, in the event, proves
more or less benign. On the surface, anyway, the small rise
in payrolls gives the Fed leeway to stick to its gradualist
approach to raising rates.
But for all that the employment numbers provided the
detonator of the burst upward in stock prices, we suspect
they were just an excuse for a market that, for reasons
known only to itself and the secret sect that practices
technical analysis, was itching to go up. Certainly, a single
month's tally -- and especially last month's -- hardly spells
the end of the great economic boom.
For one thing, just as balmy weather ballooned the outsized
gains of the previous month, nasty weather cut sharply into
the job totals in February. If you average out the payroll
increases of the past three months, you get 247,000 monthly
additions, not exactly a sign of business anemia.
For another, housing apart, the economy is bustling along at
a torrid pace that should enable it to post GDP growth of 4
1/2 %, perhaps more, in the current quarter. Auto sales in
particular and retail sales in general continue to sizzle. The
purchasing managers logged another gain in February, with
their gauge inching ahead to 56.9 from 56.3, while the
prices they paid for the stuff and services they use
ratcheted up with more than a little vigor.
What's more, one of the great engines of this extraordinary
expansion -- capital investment -- far from taking a
breather, is picking up the pace, spurred by rising
corporate profits (just like people, the more companies get,
the more they spend).
On this score, our friends at Dresdner Kleinwort Benson
point out that capital expenditures are running at the fastest
rate since the banner year of 1994. Besides strong
earnings, they credit as driving the rush to spend the "invest
or die" mentality that continues to dominate the corporate
psyche, the unremitting pressure to cut costs in a
noninflationary environment and, of course, the rise of the
Internet.
So at most, the subdued February job performance might
enable Greenspan & Co. when they meet later this month
once more to put off taking any serious action. But
whatever the explanation they offer for their timidity,
whatever justification they claim for their procrastination,
it won't be a slowing economy simply because the
economy isn't slowing.
And in any case, Mr. Greenspan is confronted by the
rip-roaring bull market that he intimates badly needs
domesticating. A bull market, as demonstrated vividly
Friday (and we're sure much to the chairman's discomfort),
that remains full of juice and vinegar and shows not the
slightest indication of leaving quietly.
The bottom line, then, is that the employment report
changed nothing. But at least -- and it deserves a big cheer
for this one -- it freed Wall Street from the Friday funk.
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you said
Message #77541 from Tommaso at Mar 10 2000 12:06PM
I realize that my views are skewed by my holdings, but
it seems to me that the up and down ticks of the price of
oil correlate to some extent with the movement of the
stock markets.
In any case, the dollar drain to pay almost triple for oil
imports is bound to remove some of the purchasing power
that has kept the bubble inflated.
And the minute the dollar weakens to any degree, it's
an automatic boost for oil prices. |
