Does Jeremy Siegel Live in a Cave?

March 1, 2011
Crude Realities

The world produces -- and consumes -- about 80 million barrels of crude oil a day. At a $100 a barrel, that amounts to $8 billion dollars or just short of $3 trillion dollars a year. World GDP is about $60 trillion using current dollar exchange rates, and about 20% higher if measured on the basis of purchasing power parity. That means oil consumption is about 4% to 5% of world GDP.

Not one thought is spent analyzing how the price of oil affects the remaining 95% to 96% of world GDP. For example, let's say I was thinking about going out to eat and would have enjoyed the very best that our American service economy offered, but the high price of oil made me stay home instead.

Yet even if oil prices soar, I would be surprised if stock prices fell by much more than 20%.

That's certainly comforting. Let's all make a mental note of that quote for future reference.

March 2, 2011
Rebound in travel industry threatened by fuel prices

"The big trend that is about to hit us is the rise in the price of oil. It is going to underlie everything," travel writer Pauline Frommer predicted in an interview. "That's the dragon looming on the horizon."

March 3, 2011
Declines in restaurant visits are slowing

As encouraging as the latest stats are for restaurants still coping with the prolonged economic downturn, rising gasoline prices could easily stunt the industry's slow recovery, says NPD analyst Bonnie Riggs.

February 24, 2011
Spiking Oil Prices: Time To Worry Yet?

Different industries are watching closely for those crossing-the-Rubicon price points that spell real trouble.

The Rubicon is definitely worth watching. It reminds me of 2008.

March 19, 2008
Gas prices gouge eating, shopping habits, too

Americans are paying more at the pump, and that means that they have less money for everything from the cable bill to eating out.

Update:

March 24, 2008
Jeremy Siegel On The Financial Crisis

The deep downward spikes that we used to get, particularly in manufacturing--those suddenly down-and-then-up spikes of unemployment--have given way in a more service-oriented economy, in a slower, much more muted behavior of unemployment and employment and for a little longer.

The muted behavior of unemployment in our service-oriented economy was certainly a sight to behold.

Since we've talked a couple of weeks ago, the dollar has gone down even further, commodity prices have risen, and oil is now at $110 and going higher. That is my primary concern.

Keep in mind that we officially entered the recession in December 2007 (three months earlier) when oil was under $100. $145+ oil was therefore just insult to injury.

So, my feeling is that we may not pick up until 2009, although I think that 2008 might surprise us in the second half.

The second half of 2008 was quite the shocker. The S&P 500 traded at 1,349.88 when he offered his wisdom. It hit a low of 666.79 on March 6, 2009. For those keeping track at home, that was a 50% loss. So what did he tell investors to do?

Don't get scared and sell anything out. This is not going to be a Great Depression. I know that some people are talking about it, but if you see the way the Fed is moving and making sure that liquidity is in the system, and if you look at what is happening in the real economy--and believe it or not, it's still moving along, with very few people, net, having lost their jobs. I think that you will see that there are a lot of reasons for being confident about the future.

Oil is $100 again. He's telling investors not to get scared again. Wonderful.